Interbank Lending and the Spread of Bank Failures: A Network Model of Systemic Risk

Published: May 29, 2012
Abstract
We model a stylized banking system where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as borrowers as well as lenders. A network of interbank lending is established that is used as a transmission mechanism for the failure of banks through the system. We trigger a potential banking crisis by exogenously failing a bank and investigate the spread of this failure within the banking...
Paper Details
Title
Interbank Lending and the Spread of Bank Failures: A Network Model of Systemic Risk
Published Date
May 29, 2012
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