We develop a mean field model of interbanking borrowing and lending activities. Each bank borrows from or lends to other counterparties at an idiosyncratic rate, and is exposed to sudden shocks affecting the level of its monetary reserves. Using weak convergence analysis, we provide an explicit...

This paper designs a systemic risk measure for the European banking system as a hypothetical distress insurance premium (DIP), which integrates economically the main characteristics of systemic risk — size, default probability, and interconnectedness. We further identify the individual...

We propose a hypothetical distress insurance premium (DIP) as a measure of the European banking systemic risk, which integrates the characteristics of bank size, default probability, and interconnectedness. Based on this measure, the systemic risk of European banks reached its height in late...

We develop a macroprudential contagion stress test framework to examine how a network of Norwegian banks can amplify a shock to bank capital at the macro level. The framework looks at how fire sales of common asset holdings can lead to valuation losses for banks (indirect contagion), and how...

In this paper, we measure the systemic risk with a novel methodology, based on a “spatial-temporal” approach. We propose a new bank systemic risk measure to consider the two components of systemic risk: cross-sectional and time dimension. The aim is to highlight the “time-space dynamics”...