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Filling in the Blanks: Network Structure and Interbank Contagion

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Bibliographic Details
Other Authors: Craig, Ben R. [Other] • von Peter, Goetz [Other]
Type of Resource: E-Book
Language: English
published:
[S.l.] SSRN [2014]
Series: BIS Working Paper
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures. This paper proposes an efficient alternative that combines information-theoretic arguments with economic incentives to produce more realistic interbank networks that preserve important characteristics of the original interbank market. The method loads the most probable links with the largest exposures consistent with the total lending and borrowing of each bank, yielding networks with minimum density. When used in a stress-testing context, the minimum-density solution overestimates contagion, whereas maximum entropy underestimates it. Using the two benchmarks side by side defines a useful range that bounds the cost of contagion in the true interbank network when counterparty exposures are unknown
Item Description: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 1, 2014 erstellt
Physical Description: 1 Online-Ressource (27 p)
Access: Open Access