Financial Networks and Contagion

• 成果类型: Article
• 署名作者: Elliott, Matthew; Golub, Benjamin; Jackson, Matthew O.
• 署名单位: California Institute of Technology; Harvard University; Stanford University; The Santa Fe Institute; Canadian Institute for Advanced Research (CIFAR)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.104.10.3115
• 发表日期: 2014
• 页码: 3115-3153
• 关键词: BILATERAL EXPOSURES; Systemic risk; insurance

摘要

We study cascades of failures in a network of interdependent financial organizations: how discontinuous changes in asset values (e.g., defaults and shutdowns) trigger further failures, and how this depends on network structure. Integration (greater dependence on counterparties) and diversification (more counterparties per organization) have different, nonmonotonic effects on the extent of cascades. Diversification connects the network initially, permitting cascades to travel; but as it increases further, organizations are better insured against one another's failures. Integration also faces trade-offs: increased dependence on other organizations versus less sensitivity to own investments. Finally, we illustrate the model with data on European debt cross-holdings.