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Erscheinungsjahr: 
2022
Schriftenreihe/Nr.: 
CESifo Working Paper No. 10111
Verlag: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Zusammenfassung: 
We introduce endogenous fire sales into a simple network model. For any given initial distribution of shocks across the network, we develop a clearing algorithm to solve for the financial equilibrium. We then utilise the results to perform ex ante risk assessment and derive risk premia for every balance sheet item where liabilities are differentiated according to priority rights. We find that risk premia reflect both idiosyncratic risk and risk of contagion (network risk). Moreover, we show that network risk magnifies the gap between the risk premia of equity and debt. We also perform comparative statics, showing that changes to the distribution of shocks and network structure can have substantial effects on the level of systemic losses.
Schlagwörter: 
networks
fire sales
systemic risk premia
risk assessment
JEL: 
G33
G32
D85
Dokumentart: 
Working Paper
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