TY  - UNPD
A1  - Aldasoro, Iñaki
A1  - Delli Gatti, Domenico
A1  - Faia, Ester
T1  - Bank networks : contagion, systemic risk and prudential policy
T2  - SAFE working paper series ; No. 87
N2  - We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a matching algorithm. We compare three alternative matching algorithms: maximum entropy, closest matching and random matching. Contagion occurs through liquidity hoarding, interbank interlinkages and fire sale externalities. The resulting network configurations exhibits a core-periphery structure, dis-assortative behavior and low clustering coefficient. We measure systemic importance by means of network centrality and input-output metrics and the contribution of systemic risk by means of Shapley values. Within this framework we analyze the effects of prudential policies on the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower efficiency (measured by aggregate investment in non-liquid assets); equity requirements tend to reduce risk (hence increase stability) without reducing significantly overall investment.
T3  - SAFE working paper - 87 
KW  - banking networks
KW  - centrality metrics
KW  - systemic risk
KW  - contagion
KW  - fire sales
KW  - prudential regulation
Y1  - 2015
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/37119
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-371190
UR  - http://ssrn.com/abstract=2572877
IS  - January 2015
PB  - SAFE
CY  - Frankfurt am Main
ER  -