TY - GEN
T1 - Bank Contagion Risk through Fire-Sales
T2 - 8th IEEE Symposium Series on Computational Intelligence, SSCI 2018
AU - Zhang, Xingjia
AU - Mo, Cheuk Yin Jeffrey
AU - Yang, Steve Y.
N1 - Publisher Copyright:
© 2018 IEEE.
PY - 2018/7/2
Y1 - 2018/7/2
N2 - This paper studies the impact of interbank risk exposures due to fire sales in the interbank lending market. We incorporate fire sale behaviors in a large-scale agent-based model that represents dynamic U.S. Interbank lending system. We compare the simulated interbank networks with and without fire sales. The model shows that fire sales reduce the number of bank defaults due to financial shocks, while increasing the likelihood of contagion. Moreover, we investigate the implications of the capital requirements imposed by the Basel regulation by conducting a sensitivity test on capital ratios. We find the higher capital requirements may result in larger number of bank defaults.
AB - This paper studies the impact of interbank risk exposures due to fire sales in the interbank lending market. We incorporate fire sale behaviors in a large-scale agent-based model that represents dynamic U.S. Interbank lending system. We compare the simulated interbank networks with and without fire sales. The model shows that fire sales reduce the number of bank defaults due to financial shocks, while increasing the likelihood of contagion. Moreover, we investigate the implications of the capital requirements imposed by the Basel regulation by conducting a sensitivity test on capital ratios. We find the higher capital requirements may result in larger number of bank defaults.
KW - Agent-based simulation
KW - contagion risk
KW - fire sale
KW - interbank lending market
KW - liquidity risk
KW - network topology
UR - http://www.scopus.com/inward/record.url?scp=85062774244&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85062774244&partnerID=8YFLogxK
U2 - 10.1109/SSCI.2018.8628902
DO - 10.1109/SSCI.2018.8628902
M3 - Conference contribution
AN - SCOPUS:85062774244
T3 - Proceedings of the 2018 IEEE Symposium Series on Computational Intelligence, SSCI 2018
SP - 2321
EP - 2328
BT - Proceedings of the 2018 IEEE Symposium Series on Computational Intelligence, SSCI 2018
A2 - Sundaram, Suresh
Y2 - 18 November 2018 through 21 November 2018
ER -