An Integrated Model of Systemic Risk in Financial Networks

Stefan Weber
Leibniz Universität Hannover

The talk presents a comprehensive model of a financial system that integrates network effects (cf. Eisenberg & Noe (2001)), bankruptcy costs (cf. Rogers & Veraart (2013)), cross- holdings (cf. Elsinger (2009)), and fire sales (cf. Cifuentes, Shin & Ferrucci (2005)). For the integrated financial market we prove the existence of a price-payment equilibrium and design an algorithm for the computation of the greatest and the least equilibrium. Systemic risk measures and the number of defaults corresponding to the greatest price-payment equilibrium are analyzed in several comparative case studies. These illustrate the individual and joint impact of interbank liabilities, bankruptcy costs, cross-holdings and fire sales on systemic risk. The talk is based on joint work with Kerstin Awiszus.

Presentation (PDF File)

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