Multi-layered interbank model for assessing systemic risk
Mattia Montagna and
Christoffer Kok ()
No 1873, Kiel Working Papers from Kiel Institute for the World Economy (IfW)
In this paper, we develop an agent-based multi-layered interbank network model based on a sample of large EU banks. The model allows for taking a more holistic approach to interbank contagion than is standard in the literature. A key finding of the paper is that there are non-negligible non-linearities in the propagation of shocks to individual banks when taking into account that banks are related to each other in various market segments. In a nutshell, the contagion effects when considering the shock propagation simultaneously across multiple layers of interbank networks can be substantially larger than the sum of the contagion-induced losses when considering the network layers individually. In addition, a bank 'systemic importance' measure based on the multi-layered network model is developed and is shown to outperform standard network centrality indicators.
Keywords: financial contagion; interbank market; network theory (search for similar items in EconPapers)
JEL-codes: C45 C63 D85 G21 (search for similar items in EconPapers)
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Working Paper: Multi-layered interbank model for assessing systemic risk (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1873
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