Intermediation and Voluntary Exposure to Counterparty Risk

• 成果类型: Article
• 署名作者: Farboodi, Maryam
• 署名单位: National Bureau of Economic Research; Massachusetts Institute of Technology (MIT); Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/725168
• 发表日期: 2023
• 页码: 3267-3309
• 关键词: Financial networks; trading networks; Systemic risk; contagion; MODEL; BANK; liquidity; MARKET; TOPOLOGY; core

摘要

I study a model of the financial sector in which intermediation among debt-financed banks gives rise to an endogenous core-periphery network. Endogenous intermediation generates excessive systemic risk in the financial network. Financial institutions have incentives to capture intermediation spreads through strategic borrowing and lending decisions. By doing so, they tilt the division of surplus along an intermediation chain in their favor, while at the same time reducing aggregate surplus. The network is inefficient relative to a constrained-efficient benchmark, since banks that make risky investments overconnect, exposing themselves to excessive counterparty risk, while banks that mainly provide funding end up with too few connections.