The formation of financial networks

• 成果类型: Article
• 署名作者: Babus, Ana
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Chicago
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12126
• 发表日期: 2016
• 页码: 239-272
• 关键词: systemic risk; interbank market; contagion; MODEL; liquidity; BANK; exposures

摘要

Modern banking systems are highly interconnected. Despite various benefits, linkages between banks carry the risk of contagion. In this article, I investigate whether banks can commit ex ante to mutually insure each other, when there is contagion risk in the financial system. I model banks' decisions to share this risk through bilateral agreements. A financial network that allows losses to be shared among various counterparties arises endogenously. I characterize the probability of systemic risk, defined as the event that contagion occurs conditional on one bank failing, in equilibrium interbank networks. I show that there exist equilibria in which contagion does not occur.