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Title:Contagion at the interbank market with stochastic LGD PDF Logo
Authors:Memmel, Christoph
Sachs, Angelika
Stein, Ingrid
Issue Date:2011
Series/Report no.:Discussion Paper Series 2: Banking and Financial Studies 2011,06
Abstract:This paper investigates contagion at the German interbank market under the assumption of a stochastic loss given default (LGD). We combine a unique data set about the LGD of interbank loans with data about interbank exposures. We find that the frequency distribution of the LGD is u-shaped. Under the assumption of a stochastic LGD, simulation results show a more fragile banking system than under the assumption of a constant LGD. There are three types of banks concerning their tendency to trigger contagion: banks with strongly varying impact, banks whose impact is relatively constant, and banks with no direct impact.
Subjects:interbank market
contagion
stochastic LGD
JEL:D53
E47
G21
ISBN:978-3-86558-703-9
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

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