Title: Cascading Defaults and Systemic Risk of a Banking System
Abstract: Systemic risk of a banking system arises from cascading defaults due to interbank linkages. Any large negative external shock can in principle trigger cascading defaults, but shocks to systematic risk factors, as opposed to banks' idiosyncratic elements, are more likely to drive cascading defaults and hence to cause higher systemic risk. This paper proposes a structural model for a banking system in which bank assets are subject to both systematic and idiosyncratic risks and bank liabilities contain interbank
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
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