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Bilateral Exposures and Systemic Solvency Risk

Author

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  • Gourieroux, C.
  • Heam, J.C.
  • Monfort, A.

Abstract

By introducing a structure of the balance sheets of the banks, which takes into account their bilateral exposures in terms of stocks or lendings, we get a structural model for default analysis. This model allows distinguishing the exogenous and endogenous default dependence. We prove the existence and uniqueness of the liquidation equilibrium, we study the consequences of exogenous shocks on the banking system and we measure contagion phenomena. This approach is illustrated by an application to the French banking system.

Suggested Citation

  • Gourieroux, C. & Heam, J.C. & Monfort, A., 2012. "Bilateral Exposures and Systemic Solvency Risk," Working papers 414, Banque de France.
    • Handle: RePEc:bfr:banfra:414
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Contagion; Systemic Risk; Solvency; Clearing; Liquidation Equilibrium; Impulse Response; Value-of-the Firm Model.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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