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A risk assessment model for banks

Listed author(s):
  • Charles A.E. Goodhart
  • Pojanart Sunirand
  • Dimitrios P. Tsomocos

    ()

This paper proposes a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction among banks, where the actual risk an individual bank bears also depends on its interaction with other banks and investors. We develop a two-period general equilibrium model with three active heterogeneous banks, incomplete markets, and endogenous default. The model is calibrated against UK banking data and therefore can be implemented as a risk assessment tool for regulators and central banks. We address the impact of monetary and regulatory policy, credit and capital shocks in the real and financial sectors. Copyright Springer-Verlag Berlin Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s10436-004-0006-3
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Article provided by Springer in its journal Annals of Finance.

Volume (Year): 1 (2005)
Issue (Month): 2 (09)
Pages: 197-224

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Handle: RePEc:kap:annfin:v:1:y:2005:i:2:p:197-224
DOI: 10.1007/s10436-004-0006-3
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/finance/journal/10436/PS2

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  1. Dimitrios P. Tsomocos, 2003. "Equilibrium analysis, banking, contagion and financial fragility," LSE Research Online Documents on Economics 24826, London School of Economics and Political Science, LSE Library.
  2. Eva Catarineu-Rabell & Patricia Jackson & Dimitrios Tsomocos, 2005. "Procyclicality and the new Basel Accord - banks’ choice of loan rating system," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 537-557, October.
  3. Charles Goodhart & Pojanart Sunirand & Dimitrios Tsomocos, 2006. "A model to analyse financial fragility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(1), pages 107-142, 01.
  4. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Risk Assessment for Banking Systems," Management Science, INFORMS, vol. 52(9), pages 1301-1314, September.
  5. Martin Shubik, 2000. "The Theory of Money," Working Papers 00-03-021, Santa Fe Institute.
  6. M. Shubik & D. Tsomocos, 1992. "A strategic market game with a mutual bank with fractional reserves and redemption in gold," Journal of Economics, Springer, vol. 55(2), pages 123-150, June.
  7. Tsomocos, Dimitrios P., 2003. "Equilibrium analysis, banking and financial instability," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 619-655, July.
  8. Dimitrios P. Tsomocos & Lea Zicchino, 2005. "On Modelling Endogenous Default," OFRC Working Papers Series 2005fe15, Oxford Financial Research Centre.
  9. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
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