IDEAS home Printed from https://ideas.repec.org/p/rim/rimwps/18-34.html
   My bibliography  Save this paper

Simulating financial contagion dynamics in random interbank networks

Author

Listed:
  • John Leventides

    () (Department of Economics, University of Athens, Greece)

  • Kalliopi Loukaki

    () (Department of Economics, University of Athens, Greece)

  • Vassilios Papavassiliou

    () (UCD Michael Smurfit Graduate Business School, University College Dublin, Ireland; Rimini Centre for Economic Analysis)

Abstract

The purpose of this study is to assess the resilience of financial systems to exogenous shocks using techniques drawn from the theory of complex networks. We investigate by means of Monte Carlo simulations the fragility of several network topologies using a simple default model of contagion applied on interbank networks of varying sizes. We trigger a series of banking crises by exogenously failing each bank in the system and observe the propagation mechanisms that take effect within the system under different scenarios. Finally, we add to the existing literature by analyzing the interplay of several crucial drivers of interbank contagion, such as network topology, leverage, interconnectedness, heterogeneity and homogeneity across bank sizes and interbank exposures.

Suggested Citation

  • John Leventides & Kalliopi Loukaki & Vassilios Papavassiliou, 2018. "Simulating financial contagion dynamics in random interbank networks," Working Paper series 18-34, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:18-34
    as

    Download full text from publisher

    File URL: http://rcea.org/RePEc/pdf/wp18-34.pdf
    Download Restriction: no

    More about this item

    Keywords

    Interbank contagion; random networks; financial stability; interconnectedness; systemic risk;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:18-34. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marco Savioli). General contact details of provider: http://edirc.repec.org/data/rcfeait.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.