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Bank Networks: Contagion, Systemic Risk and Prudential Policy
We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the ...
Too Interconnected to Fail: A Survey of the Interbank Networks Literature
The banking system is highly interconnected and these connections can be conveniently represented as an interbank network. This survey presents a systematic overview of the recent advances in the theoretical literature on ...
Measuring Sovereign Contagion in Europe
This paper analyzes sovereign risk shift-contagion, i.e. positive and significant changes in the propagation mechanisms, using bond yield spreads for the major eurozone countries. By emphasizing the use of two econometric ...