Multi-Layered Interbank Model For Assessing Systemic Risk

By Mattia Montagna, Christoffer Kok. Social Science Research Network, 2016

132 citations recorded by the source corpus.

In this paper, we develop an agent-based multi-layered interbank network model based on a sample of large EU banks. The model allows for taking a more holistic approach to interbank contagion than is standard in the literature. A key finding of the paper is that there are non-negligible non-linearities in the propagation of shocks to individual banks when taking into account that banks are related to each other in various market segments. In a nutshell, the contagion effects when considering the shock propagation simultaneously across multiple layers of interbank networks can be substantially larger than the sum of the contagion-induced losses when considering the network layers individually. In addition, a bank 'systemic importance' measure based on the multi-layered network model is developed and is shown to outperform standard network centrality indicators.

View Paper: https://www.semanticscholar.org/paper/2d70500428f04927c042da5bec041a4b1b055f74

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

Citations in the corpus

More is different ... and complex! the case for agent-based macroeconomics (2019, background): “Money has usually only the function of unit of account and the nominal rigidities incarnated in sticky prices allow 14A non exhaustive list includes the Bank of England (Braun-Munzinger et al., 2016; Baptista et al., 2016); the European Central Bank (Montagna and Kok, 2016; Halaj, 2018); Central Ban”
The multi-layer network nature of systemic risk and its implications for the costs of financial crises (2015, background): “This non-linear effect was seen in a different context before in Montagna and Kok [50].”
Multiplex Interbank Networks and Systemic Importance: An Application to European Data (2016, unknown): “Parshani et al. (2010) show how well connected ports tend to couple with well connected airports.”
Too Interconnected to Fail: A Survey of the Interbank Networks Literature (2015, background): “Interbank network models are clearly able to capture these exposures and they do so at increasing levels of complexity, representing different maturities and instruments at the same time (Aldasoro and Alves, 2015; Langfield et al., 2014; Montagna and Kok, 2013) and including several contagion channe”