Multi-layered interbank model for assessing systemic risk

Mattia Montagna and Christoffer Kok

No 1873, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: In this paper, we develop an agent-based multi-layered interbank network model based on a sample of large EU banks. The model allows for taking a more holistic approach to interbank contagion than is standard in the literature. A key finding of the paper is that there are non-negligible non-linearities in the propagation of shocks to individual banks when taking into account that banks are related to each other in various market segments. In a nutshell, the contagion effects when considering the shock propagation simultaneously across multiple layers of interbank networks can be substantially larger than the sum of the contagion-induced losses when considering the network layers individually. In addition, a bank 'systemic importance' measure based on the multi-layered network model is developed and is shown to outperform standard network centrality indicators.

Keywords: financial contagion; interbank market; network theory (search for similar items in EconPapers)
JEL-codes: C45 C63 D85 G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (66)

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Related works:
Working Paper: Multi-layered interbank model for assessing systemic risk (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1873

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