Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197955 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2017-30
Publisher: 
Bank of Canada, Ottawa
Abstract: 
In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures. However, frequently, market participants do not observe the actual network of exposures. I propose an approach that incorporates this network of exposures, among other factors, in a valuation model of credit default swaps. The model-implied spreads are then used to retrieve the set of networks that are consistent with market spreads. The approach is illustrated with an application to the UK banking system.
Subjects: 
Financial institutions
Financial stability
JEL: 
C63
D85
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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