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Static and dynamic ...
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Cohen-Cole, Ethan
(author)
Static and dynamic networks in interbank markets
- Article/chapterEnglish2015
Publisher, publication year, extent ...
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2015-02-12
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Cambridge University Press (CUP),2015
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printrdacarrier
Numbers
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LIBRIS-ID:oai:DiVA.org:su-124418
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https://urn.kb.se/resolve?urn=urn:nbn:se:su:diva-124418URI
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https://doi.org/10.1017/nws.2015.1DOI
Supplementary language notes
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Language:English
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Summary in:English
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Classification
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Subject category:ref swepub-contenttype
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Subject category:art swepub-publicationtype
Notes
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This paper proposes a model of network interactions in the interbank market. Our innovation is to model systemic risk in the interbank network as the propagation of incentives or strategic behavior rather than the propagation of losses after default. Transmission in our model is not based on default. Instead, we explain bank profitability based on competition incentives and the outcome of a strategic game. As competitors' lending decisions change, banks adjust their own decisions as a result: generating a “transmission” of shocks through the system. We provide a unique equilibrium characterization of a static model, and embed this model into a full dynamic model of network formation. We also determine the key bank, which is the bank that is crucial for the stability of the financial network.
Subject headings and genre
Added entries (persons, corporate bodies, meetings, titles ...)
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Patacchini, Eleonora
(author)
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Zenou, YvesStockholms universitet,Nationalekonomiska institutionen,The Research Institute of Industrial Economics (IFN), Sweden(Swepub:su)yvze0888
(author)
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Stockholms universitetNationalekonomiska institutionen
(creator_code:org_t)
Related titles
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In:Network Science: Cambridge University Press (CUP)3:01, s. 98-1232050-12422050-1250
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