Multi-layered Interbank Model for Assessing Systemic Risk
AbstractIn this paper, we develop an agent-based multi-layered interbank network model based on a sample of large EU banks. The model allows for taking a more holistic approach to interbank contagion than is standard in the literature. A key finding of the paper is that there are non-negligible non-linearities in the propagation of shocks to individual banks when taking into account that banks are related to each other in various market segments. In a nutshell, the contagion effects when considering the shock propagation simultaneously across multiple layers of interbank networks can be substantially larger than the sum of the contagion-induced losses when considering the network layers individually. In addition, a bank “systemic importance” measure based on the multi-layered network model is developed and is shown to outperform standard network centrality indicators
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1873.
Length: 55 pages
Date of creation: Sep 2013
Date of revision:
Financial Contagion; interbank market; Network theory;
Find related papers by JEL classification:
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-BAN-2013-10-05 (Banking)
- NEP-CBA-2013-10-05 (Central Banking)
- NEP-CMP-2013-10-05 (Computational Economics)
- NEP-NET-2013-10-05 (Network Economics)
- NEP-RMG-2013-10-05 (Risk Management)
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