The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the recent theoretical and empirical literature, for assessing systemic risk and identi…
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48 results for “interbank claims”
Model shows how banks' fears of future defaults can cause immediate financial stress.
problem How banks' future default worries cause immediate financial stress.
method Dynamic interbank model with endogenous distress contagion, mark-to-market valuation adjustment, forward-backward approach.
result Distress contagion acts as a stochastic volatility term leading to clustering and down-market spikes.
Model assesses systemic risk in interconnected financial systems.
problem Systemic risk in interconnected financial systems.
method Balance-sheet consistent valuation model for interbank claims.
result Existence and uniqueness of optimal valuations for all banks.
Interbank Credit and the Money Manufacturing Process. A Systemic Perspective on Financial Stabilityq-fin.GN
Interbank credit can create money, leading to financial instability.
problem Systemic instability caused by coordination failures in interbank credit.
method Developed a model of interbank credit coordination under minimal institutions, analyzed through simulation.
result Interbank credit can lead to unbound monetary systems and financial instability.
Systemic Interbank Network Risks in Russiaphysics.soc-ph
Modelling of contagion in interbank networks is discussed. A model taking into account bow-tie structure and dissasortativity of interbank networks is developed. The model is shown to provide a good quantitative description of the Russian interbank market. Detailed arguments favoring the non-percolative nature of conta…
New method reduces systemic risk underestimation in interbank networks.
problem Underestimation of interbank contagion risk by maximum entropy method.
method Sparse network reconstruction algorithm using maximum entropy method.
result More reliable estimation of systemic risk in interbank networks.
Model shows overnight interbank loans can lead to bank defaults without external shocks.
problem Systemic risk in overnight interbank market.
method Dynamic model of interbank loans and prudential requirements.
result Intrasystem cash fluctuations can cause systemic defaults.
Systemic risks of default contagion in the Russian interbank market are investigated. The analysis is based on considering the bow-tie structure of the weighted oriented graph describing the structure of the interbank loans. A probabilistic model of interbank contagion explicitly taking into account the empirical bow-t…
Paper uses interbank contagion to predict U.S. bank defaults, finding it highly explanatory.
problem Predicting U.S. bank defaults using interbank contagion.
method Regression and neural network models were used to analyze U.S. commercial bank data.
result Interbank contagion is highly explanatory in default prediction, often outperforming established metrics.
Optimized execution model using interbank and internal liquidity.
problem Minimizing market impact in trading.
method Integrates interbank limit and market orders with internal market-making liquidity.
result Reduces market impact and improves execution efficiency.
Study reveals multiple core-periphery structures in interbank markets, transforming during financial crises.
problem Understanding the complex structure and transformation of interbank markets during financial crises.
method Novel core-periphery detection method on eMID interbank market data.
result Interbank markets exhibit multiple core-periphery pairs and transition to bipartite structures over short time scales.
Modeling liquidity shocks in interbank markets to assess systemic risk.
problem Systemic risk in interbank lending markets due to liquidity shocks.
method Developed an EDB model based on compartment models used in epidemics.
result Interbank networks were highly susceptible to liquidity contagion at the start of the financial crisis.
Proposes a new model to simulate interbank market liquidity risk.
problem Lack of complete interbank network data for systemic liquidity risk analysis.
method Epidemic model using funding liquidity shortage mechanism, enriched with country and bank risk features.
result Model successfully reproduces systemic liquidity risk across different years and countries.
Systemic risks characterizing the Russian overnight interbank market from the network point of view are analyzed.
Study shows self-exciting shocks increase systemic risk in interbank networks.
problem Systemic risk in interbank lending networks with self-exciting shocks.
method Mean-field model, weak convergence analysis, measure-valued process, law of large numbers.
result Self-exciting shocks increase systemic risk in interbank networks.
Study amplifies systemic risk in interbank markets due to credit and liquidity shocks.
problem Systemic risk in interbank markets due to credit and liquidity shocks.
method Defined Debt-Solvency Rank to estimate amplification of losses, implemented on European banks dataset.
result Liquidity spillovers substantially increase systemic risk and cannot be neglected in stress-test scenarios.
In spite of the growing theoretical literature on cascades of failures in interbank lending networks, empirical results seem to suggest that networks of direct exposures are not the major channel of financial contagion. In this paper we show that networks of interbank exposures can however significantly amplify contagi…
Study uncovers that loan maturity layers in interbank networks are crucial for understanding their structure and functions.
problem Lack of maturity details in interbank lending networks hinders understanding of network structure and functions.
method Used a complete interbank loan contract dataset and applied the layered stochastic block model to investigate multiple maturity layers.
result Optimal maturity granularity reveals specific economic functions, such as liquidity intermediation and financing.
Modeling financial system dynamics with interbank flows and borrowing.
problem Recreating financial crises like liquidity traps.
method Explicit solution of stochastic optimal control problems, focusing on utility maximization and central bank control.
result Explicit distribution of defaults in the financial system.
The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured and unsecured nature of the contract. We find that layers have different topolog…
Study confirms eurozone interbank market stability but finds higher collateral reuse.
problem Analyzing eurozone interbank market behavior and stability.
method Examined secured transactions data from ECB, tested stylized facts, measured network properties.
result Observed higher collateral reuse and network symmetry compared to unsecured markets.
The study identifies relationship lending in interbank markets using statistical tests.
problem Lack of consensus on measuring relationship strength in lending between banks.
method Statistical tests to identify relationship lending as significant ties between banks.
result The fraction of relationship lending is stable and lenders impose high interest rates during financial distress.
Dynamic network model forecasts interbank market link formation.
problem Forecasting interbank market link formation with time-varying topologies.
method Dynamic network model with past link existence and node-specific latent variables. Markov dynamics and EM algorithm for estimation.
result Forecasting future link presence and recognition of preferential lending.
Study examines large banks' role in interbank markets using game theory.
problem Understanding systemic risk in interbank markets with large banks.
method Mean-field game framework, convex analysis, Monte Carlo simulations.
result Large banks can positively or negatively impact market stability.
The Relationship Between Stock Market Parameters and Interbank Lending Market: an Empirical Evidenceq-fin.ST
The article presents calculations that prove practical importance of the earlier derived theoretical relationship between the interest rate on the interbank credit market, volume of investment and the quantity of securities tradable on the stock exchange.
Model financial contagion with dynamic interbank liabilities.
problem Model financial contagion with time dynamics of interbank liabilities.
method Generalized Eisenberg-Noe model with time dynamics, separating cash and capital accounts.
result Distinguish between delinquency and default, insolvency and illiquidity.
Agent-based model shows interbank market's fragility and resilience to crises.
problem Stability of interbank lending market during financial crises.
method Agent-based network model with various pro-cyclical triggers.
result Systemic fragility up to 2008, resilience after 2008, increased crisis speed in 2011.
Study reveals patterns in daily bank transactions.
problem Understanding systemic risk in interbank networks.
method Analysis of daily interbank transactions and a simple model.
result Distinctive network-scale dynamics emerge from stable interaction patterns.
A lending scheme for a system of interconnected banks with probabilistic constraints of failureq-fin.MF
Optimal interbank lending scheme with probabilistic bank failure constraints.
problem Optimizing interbank lending in a network of interconnected banks with probabilistic constraints on failure.
method Derive a closed-form solution for an optimal control problem, compute systemic relevance parameters.
result General solution for interbank lending with probabilistic constraints for all banks.
Model measures diversification in Austrian interbank market, showing increased homogeneity.
problem Measuring diversification in Austrian interbank market.
method Dynamic network model with Markov property to capture time dependencies.
result Core banks tend to distribute market exposures more equally over time.
CDS market redesign makes financial networks more resilient to insolvency.
problem Managing systemic risk in financial networks during insolvency cascades.
method Designing a CDS market to rewire interbank exposures, adding systemic insurance surcharges based on network topology.
result A regulated CDS market makes financial systems more resilient to insolvency.
Criticality in a model of banking crisescond-mat.dis-nn
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further failures. We simulate a model of interbank lending to study the interplay of these …
Study connects bank default models using dynamic contagion.
problem Understanding default contagion in heterogeneous interbank systems.
method Proposes a dynamic default contagion model with endogenous early defaults for a finite set of banks, reformulating as a stochastic particle system.
result Existence of clearing systems and continuity of the system response for the mean-field problem.
We use daily data on bilateral interbank exposures and monthly bank balance sheets to study network characteristics of the Russian interbank market over Aug 1998 - Oct 2004. Specifically, we examine the distributions of (un)directed (un)weighted degree, nodal attributes (bank assets, capital and capital-to-assets ratio…
Centralized systemic risk control in the interbank system: Weak formulation and Gamma-convergencemath.OC
Paper studies central bank's strategy to control systemic risk in interbank system.
problem Minimizing average distance between log-monetary reserves and target levels.
method Weak formulation, Ekeland's variational principle, Gamma-convergence, stochastic Fokker-Planck-Kolmogorov equation.
result Proves convergence of optimal strategies as number of banks increases.
Model assesses how supply chain disruptions affect financial stability.
problem Systemic risk in production networks and its financial implications.
method Data-driven econo-financial stress-testing framework combining supply chain and interbank networks.
result Increase of up to 28% in financial systemic risk due to production network contagion.
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of these networks relies on the representation of changes follow-on the occurrence of…
Reciprocity in Interbank Marketsq-fin.CP
The paper models reciprocity in interbank markets using a statistical null model.
problem Understanding the importance of individual banks in financial networks.
method Developed an exponential random graph model to account for reciprocal links on both topological and weighted levels.
result Weighted reciprocity in interbank markets is more significant than network size and volume before the financial crisis.
Reverse stress testing reveals key triggers of financial contagion.
problem Identifying the smallest exogenous shock leading to systemic loss.
method Reconstructing interbank network dynamics and analyzing shocks.
result Ranking banks by systemic importance based on smallest shocks.
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
problem Enhancing financial stability in interconnected banking systems.
method Financial network model with contingent convertible (CoCo) debt obligations.
result Replacing unsecured interbank debt with CoCo debt decreases systemic risk and increases bank shareholder value.
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted institution to start a cascade depends on an interplay of shock size and connectivity. Fu…
Study optimizes interbank lending and borrowing to reduce systemic risk.
problem Optimizing lending and borrowing in interbank markets to mitigate systemic risk.
method Risk-sensitive mean field games with common noise, convex analysis, Fokker-Planck equations, first hitting time method.
result Risk-averse behavior reduces individual and systemic bank risks.
Study compares empirical systemic risk with balance sheet risk in interbank networks.
problem Disentangling balance sheet risk from network effects in systemic risk.
method Generalised DebtRank dynamics and maximum-entropy approach to compare observed and expected systemic risk.
result Systemic risk levels are compatible but differ significantly during turbulent times.
The paper examines how banks' exposure to similar risks and direct interbank connections can lead to financial contagion and instability.
problem Financial contagion and instability in interconnected bank networks.
method Analyzes a random network of banks connected through the interbank market, considering different levels of network connectivity and diversification levels.
result Optimal diversification levels for banks' exposure to similar risks are not universally optimal across all levels of network connectivity.
We analyze how errors in interbank liabilities affect the clearing vector in financial systems.
problem Estimation errors in interbank liabilities can lead to inaccuracies in the clearing vector, impacting risk assessments.
method We quantify the sensitivity of the clearing vector to estimation errors in the interbank liabilities matrix using a basis for permissible perturbations.
result We derive analytical solutions for the maximal deviations of the clearing vector and compute upper bounds for worst-case perturbations.
The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model selection among several possible two block organizations of the network: these include b…
New method reconstructs interbank networks enforcing reciprocity to improve stability and risk prediction.
problem Lack of public interbank network data and difficulty in replicating cycles.
method Proposes a new network reconstruction method enforcing sparsity and link reciprocity from aggregate data.
result Adding reciprocity improves prediction of network properties, including largest real eigenvalue and eccentricity of eigenvalues.
Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network metrics (for example DebtRank) of the interbank liability network which is availabl…