A risk assessment model for banks

Charles A.E. Goodhart, Pojanart Sunirand and Dimitrios Tsomocos

Annals of Finance, 2005, vol. 1, issue 2, 197-224

Abstract: This paper proposes a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction among banks, where the actual risk an individual bank bears also depends on its interaction with other banks and investors. We develop a two-period general equilibrium model with three active heterogeneous banks, incomplete markets, and endogenous default. The model is calibrated against UK banking data and therefore can be implemented as a risk assessment tool for regulators and central banks. We address the impact of monetary and regulatory policy, credit and capital shocks in the real and financial sectors. Copyright Springer-Verlag Berlin Heidelberg 2005

Keywords: Financial fragility; Financial contagion; Systemic risk; Banks; Monetary policy; Regulatory policy; Equilibrium analysis; C68; E4; E5; G11; G21 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (65)

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Working Paper: A risk assessment model for banks (2004)
Working Paper: A Risk Assessment Model for Banks (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:1:y:2005:i:2:p:197-224

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DOI: 10.1007/s10436-004-0006-3

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