Insolvency and contagion in the Brazilian interbank market
Sergio R.S. Souza,
Benjamin Tabak (),
Thiago Silva () and
Physica A: Statistical Mechanics and its Applications, 2015, vol. 431, issue C, 140-151
This paper proposes a new way to model and analyze contagion in interbank networks. We use a unique dataset from the Brazilian financial system and include all active financial intermediaries. We show that the contagion chain has a short propagation path. We find that first-round contagion is generated only by banks and that medium-sized banks can generate contagion, which implies that size is not the sole determinant of importance within networks. Most vulnerable financial institutions are not banks. Finally, we compute a lower bound for the financial system expected losses in a 1-year horizon. The results contribute to the development of a financial stability-monitoring toolkit.
Keywords: Systemic risk; Contagion; Interbank market; Networks; Financial stability (search for similar items in EconPapers)
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Working Paper: Insolvency and Contagion in the Brazilian Interbank Market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:431:y:2015:i:c:p:140-151
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