 Completeness, interconnectedness and distribution of interbank exposures-a parameterized analysis of the stability of financial networksAngelika Sachs Quantitative Finance, 2014, vol. 14, issue 9, 1677-1692 Abstract: This paper assesses the impact of a certain structure of interbank exposures on the stability of a stylized financial system. Given a certain balance sheet structure of financial institutions, a large number of valid matrices of interbank exposures is created by a random generator. Assuming a certain loss given default, domino effects are simulated. The main results are, first, that financial stability depends not only on the completeness and interconnectedness of the network, but also on the distribution of interbank exposures within the system (measured by entropy). Second, looking at random graphs, the sign of the correlation between the degree of equality of the distribution of claims and financial stability depends on the connectivity of the financial system as well as on additional parameters that affect the vulnerability of the system to interbank contagion. Third, the more concentrated the assets are within a money center model, the less stable it is. Fourth, a money center model with asset concentration among core banks is less stable than a random graph with banks of homogeneous size. Date: 2014 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:14:y:2014:i:9:p:1677-1692 Ordering information: This journal article can be ordered from DOI: 10.1080/14697688.2012.749421 Access Statistics for this article Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral More articles in Quantitative Finance from Taylor & Francis Journals |
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