Entangling Credit and Funding Shocks in Interbank Markets.

ABSTRACT: Credit and liquidity shocks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations. On the other hand, solvency constraints may force banks to recover lost fundings by selling their illiquid assets, resulting in effective losses in the presence of fire sales-that is, when funding shortcomings are widespread over the market. Because of the complex structure of the network of interbank exposures, these losses reverberate among banks and eventually get amplified, with potentially catastrophic consequences for the whole financial system. Inspired by the recently proposed Debt Rank, in this work we define a systemic risk metric that estima

SUBMITTER: Cimini G 

PROVIDER: S-EPMC4999134 | biostudies-literature | 2016

REPOSITORIES: biostudies-literature