Dynamic Interaction Between Asset Prices and Bank Behavior: A Systemic Risk Perspective

Aki-Hiro Sato, Paolo Tasca and Takashi Isogai

Papers from arXiv.org

Abstract: Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking system and credit risk from their lending in the interbank market. By and large, both risks increase during severe financial turmoil. Under this scenario, the paper shows the conditions under which both the individual and the systemic default tend to coincide.

Date: 2015-04, Revised 2017-02
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1504.07152

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