Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88740
Authors: 
Bluhm, Marcel
Faia, Ester
Krahnen, Jan Pieter
Year of Publication: 
2013
Series/Report no.: 
SAFE Working Paper Series 12
Abstract: 
We develop a dynamic network model whose links are governed by banks' optimizing decisions and by an endogenous tâtonnement market adjustment. Banks in our model can default and engage in firesales: risk is trasmitted through direct and cascading counterparty defaults as well as through indirect pecuniary externalities triggered by firesales. We use the model to assess the evolution of the network configuration under various prudential policy regimes, to measure banks' contribution to systemic risk (through Shapley values) in response to shocks and to analyze the effects of systemic risk charges. We complement the analysis by introducing the possibility of central bank liquidity provision.
Subjects: 
Network formation
tâtonnement
contagion
JEL: 
G0
G2
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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