Network structure and systemic risk in banking systems

Abstract : We present a quantitative methodology for analyzing the potential for contagion and systemic risk in a network of interlinked financial institutions, using a metric for the systemic importance of institutions: the Contagion Index. We apply this methodology to a data set of mutual exposures and capital levels of financial institutions in Brazil in 2007 and 2008, and analyze the role of balance sheet size and network structure in each institution's contribution to systemic risk. Our results emphasize the contribution of heterogeneity in network structure and concentration of counterparty exposures to a given institution in explaining its systemic importance. These observations plead for capital requirements which depend on exposures, rather than aggregate balance sheet size, and which target systemically important institutions.
Type de document :
Chapitre d'ouvrage
JP Fouque & J Langsam. Handbook of Systemic Risk, Cambridge Univ Press, pp.327-368, 2013, 9781107023437
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https://hal.archives-ouvertes.fr/hal-00912018
Contributeur : Rama Cont <>
Soumis le : dimanche 1 décembre 2013 - 17:15:58
Dernière modification le : lundi 29 mai 2017 - 14:24:44

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  • HAL Id : hal-00912018, version 1

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Rama Cont, Amal Moussa, Edson B Santos. Network structure and systemic risk in banking systems. JP Fouque & J Langsam. Handbook of Systemic Risk, Cambridge Univ Press, pp.327-368, 2013, 9781107023437. 〈hal-00912018〉

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