Chain bankruptcy size in inter-bank networks: the effects of asset price volatility and the network structure

Ryo Hamawaki (), Kiyoshi Izumi, Hiroki Sakaji, Takashi Shimada and Hiroyasu Matsushima
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Ryo Hamawaki: The University of Tokyo
Kiyoshi Izumi: The University of Tokyo
Hiroki Sakaji: The University of Tokyo
Takashi Shimada: The University of Tokyo
Hiroyasu Matsushima: The University of Tokyo

Journal of Computational Social Science, 2019, vol. 2, issue 1, No 7, 53-66

Abstract: Abstract One bankruptcy of a certain bank can make another bank go bankrupt. This phenomenon is called chain bankruptcy. Chain bankruptcy is a kind of “systemic risk,” a topic that has received a great deal of attention from researchers, recently. Here, we analyzed the effect of the asset price fluctuation and the inter-bank lending and borrowing network on chain bankruptcy by using an agent-based simulation. We found that: (1) as the rate of change in asset price grows, the total number of bankruptcies increases. On the other hand, when the rate of change in asset prices exceeds a certain value, the total number of bankruptcies became unvarying; (2) as the density of links increases, the total number of bankruptcies decreases, except when a certain situation occurs in core–periphery networks. These results suggest that factors causing bankruptcy are asset price fluctuations and the network structure of the inter-bank network.

Keywords: Systemic risk; Chain bankruptcy; Inter-bank networks (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s42001-019-00041-z

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