Fire Sales in a Model of Complexity

• 成果类型: Article
• 署名作者: Caballero, Ricardo J.; Simsek, Alp
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12087
• 发表日期: 2013
• 页码: 2549-2587
• 关键词: systemic risk; financial systems; liquidity; contagion; equilibrium; ambiguity; FREEZES; PRIVATE; price

摘要

We present a model of financial crises that stem from endogenous complexity. We conceptualize complexity as banks' uncertainty about the financial network of cross exposures. As conditions deteriorate, cross exposures generate the possibility of a domino effect of bankruptcies. As this happens, banks face an increasingly complex environment since they need to understand a greater fraction of the financial network to assess their own financial health. Complexity dramatically amplifies banks' perceived counterparty risk, and makes relatively healthy banks reluctant to buy risky assets. The model also features a novel complexity externality.