Bank Contagion Risk through Fire-Sales: A Heterogeneous Agent Model

Zhang, Xingjia; Mo, Cheuk Yin Jeffrey; Yang, Steve Y.

doi:10.1109/ssci.2018.8628902

Cited by 2 publications

(1 citation statement)

References 33 publications

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“…Network simulation studies have provided a practical basis for more directly quantifying the impact of network features on IMM concerns as well as examining the impact of a range of other factors, including asset fire-sales (Calimani et al, 2019;Zhang et al, 2018), rollover risk and portfolio overlap (Anand et al, 2012;Fique & Page, 2013), regulatory taxation (Poledna & Thurner, 2016;Zlatić et al, 2015), and so forth. This section attempts to find the factors affecting the IMM network structure throughout the literature in this field.…”

Section: Market Structurementioning

confidence: 99%

Interbank money market concerns and actors’ strategies—A systematic review of 21st century literature

Alaeddini

Madiès

Reaidy

et al. 2022

Journal of Economic Surveys

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As the reallocator of liquidity from banks with excess to banks with a deficit, the interbank money market (IMM) plays a fundamental role in the proper functioning of the banking system and the economy as a whole. The aggregate uncertainty derived from stochasticity of the overall level of the demand for short-term liquidity and the likelihood of domino failures of tightly connected competitors who lend themselves vast amounts of liquidity explains the complexity of decisions in this environment. To identify the most significant factors influencing actors' strategies, we first present the five underlying patterns discovered through a bibliometric analysis of 609 scientific documents in this field: contagion and systemic risk, stability, market structure, relationship and trust, and default and failure. Then, our detailed study findings on 160 recent works indicate elements that affect central banks' strategies in reducing systemic risk and preventing financial contagion, as well as managing the interbank network in a way that makes it more stable and resilient to shocks to conserve market confidence. Furthermore, they address factors that influence banks' strategies to maintain their lending relationships and mitigate default risk. In addition toThis is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

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Section: Market Structurementioning

confidence: 99%

Interbank money market concerns and actors’ strategies—A systematic review of 21st century literature

Alaeddini

Madiès

Reaidy

et al. 2022

Journal of Economic Surveys

View full text Add to dashboard Cite

show abstract

Does Adaptive Learning Neutralize Interbank Market Liquidity Hoarding under a Distressed Market Condition?

Mo,

Yang,

Zhang

2024

TEL

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This paper investigates how counterparty risk and precautionary liquidity concerns can lead to dry-up of liquidity in the interbank market with adaptive bank agents sharing common objectives of collecting as much interest payment while minimizing the insolvency risk. The agents are calibrated based on the US bank balance sheet data and are allowed to make autonomous decisions under different simulated market conditions. Through simulation studies, we observe an endogenously formed multi-layer lending network exhibiting the well-known core-periphery structure. Moreover, we find the adaptive learning banks would endogenously form liquidity hoarding phenomenon under an exogenous shock to a subset of the banks in the system. We also find that in an adaptive learning environment, fire sales would lead to a decrease in interbank liquidity and increase the probability of contagion through interbank lending networks.

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Bank Contagion Risk through Fire-Sales: A Heterogeneous Agent Model

Cited by 2 publications

References 33 publications

Interbank money market concerns and actors’ strategies—A systematic review of 21st century literature

Interbank money market concerns and actors’ strategies—A systematic review of 21st century literature

Does Adaptive Learning Neutralize Interbank Market Liquidity Hoarding under a Distressed Market Condition?

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