Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197954
Authors: 
Ahnert, Toni
Georg, Co-Pierre
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2017-29
Abstract: 
We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default. Because of counterparty risk or common exposures, bad news about one bank reveals valuable information about another bank, triggering information contagion. When banks are subject to common exposures, information contagion induces small adjustments to bank portfolios and therefore increases overall systemic risk. When banks are subject to counterparty risk, by contrast, information contagion induces a large shift toward more prudential portfolios, thereby reducing systemic risk.
Subjects: 
Financial institutions
Financial stability
JEL: 
G01
G11
G21
Document Type: 
Working Paper

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