Financial Networks: Contagion, Commitment, and Private-Sector Bailouts
نویسندگان
چکیده
منابع مشابه
Financial Networks and Contagion
We model contagions and cascades of failures among organizations linked through a network of financial interdependencies. We identify how the network propagates discontinuous changes in asset values triggered by failures (e.g., bankruptcies, defaults, and other insolvencies) and use that to study the consequences of integration (each organization becoming more dependent on its counterparties) a...
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A the many factors contributing to the financial crisis of 2007–08, the role of the growing interconnectedness of the global financial system is perhaps the least understood. The crisis exposed the fact that regulators and market participants had very limited information about the network of obligations between financial institutions. It also revealed that there was little theoretical understan...
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Should policy makers be prevented from bailing out investors in the event of a crisis? I study this question in a model of financial intermediation with limited commitment. When a crisis occurs, the policy maker will respond by transferring resources to those investors facing losses. The anticipation of such a “bailout” distorts ex ante incentives, leading intermediaries to become excessively i...
متن کاملOnline Appendix: Financial Networks and Contagion
In this section, we present a three-organization example to illustrate more about how the A and the C matrices can differ. Recall our simple example from Section IG (see Figure 1). There are two organizations, i = 1, 2, each of which has a 50% stake in the other organization. The associated crossholdings matrix C and the dependency matrix A are as follows. (Recall that Ĉii is equal to 1 minus t...
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Interbank claims are a concern to regulators as they might facilitate the dissemination of defaults and generate spill-over effects. Building on a simple model, this paper introduces a measure of the spill-over effects that a bank generates when it defaults. The measure is based on an explicit criterion, the aggregate debt repayments, and is bank’s specific, affected by the bank’s characteristi...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2003
ISSN: 1556-5068
DOI: 10.2139/ssrn.447803