Defaulting firms and systemic risks in financial networks: a normative approach

Houy, Nicolas; Jouneau, Frédéric; Grand, François Le

doi:10.1007/s00199-019-01217-4

Cited by 2 publications

(1 citation statement)

References 24 publications

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“…Li and He (2016) maintained this point of view in analyzing the impact of default probability on the loss distribution of defaults in IMM. Moreover, several studies identifying the set of defaulted banks during a clearing process implicitly addressed the significant role of contagion in default spreads (Houy et al., 2019; Kusnetsov & Veraart, 2019; Rogers & Veraart, 2013), although they focused only on stylized principles of insolvency law (Eisenberg & Noe, 2001). They all suggested that the higher contagion risk increases the likelihood of new defaults in the network.…”

Section: Results Of Integrative Review: the Affecting Factorsmentioning

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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