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Information Contagion and Inter-Bank Correlation in a Theory of Systemic Risk

Acharya, Viral V; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2003

cost of borrowing for the surviving banks. Such information contagion is thus costly to bank owners. Given their limited … rise to a pro-cyclical pattern in the correlation of bank loan returns. The direction of information contagion, the … localized nature of contagion and herding, and the welfare properties, are also characterized. …

Persistent link: https://www.econbiz.de/10005504423

Lehman Brothers: What Did Markets Know?

Gehrig, Thomas; Haas, Marlene - C.E.P.R. Discussion Papers - 2014

On September 15, 2008, Lehman Brothers Inc. announced their filing for bankruptcy. The reaction of Lehman's competitors and market participants to this bankruptcy filing announcement provides a unique field experiment of how the insolvency spills over to other financial institutions and how...

Persistent link: https://www.econbiz.de/10011083604

Precautionary hoarding of liquidity and inter-bank markets: Evidence from the sub-prime crisis

Acharya, Viral V; Merrouche, Ouarda - C.E.P.R. Discussion Papers - 2012

We study the liquidity demand of large settlement (first-tier) banks in the UK and its effect on the Sterling Money Markets before and during the sub-prime crisis of 2007-08. Liquidity holdings of large settlement banks experienced on average a 30% increase in the period immediately following...

Persistent link: https://www.econbiz.de/10011084226

Contagion in financial networks: A threat index

Demange, Gabrielle - C.E.P.R. Discussion Papers - 2012

An intricate web of claims and obligations ties together the balance sheets of a wide variety of financial institutions. Under the occurrence of default, these interbank claims generate externalities across institutions and possibly disseminate defaults and bankruptcy. Building on a simple model...

Persistent link: https://www.econbiz.de/10011084240

Asset Market Linkages in Crisis Periods

Vries, Casper G de; Hartmann, Philipp; Straetmans, Stefan - C.E.P.R. Discussion Papers - 2001

likely than in bond markets. Moreover, stock-bond contagion is about as frequent as flight to quality from stocks into bonds …

Persistent link: https://www.econbiz.de/10005661503

Liquidity Risk in Securities Settlement

Devriese, Johan; Mitchell, Janet - C.E.P.R. Discussion Papers - 2005

This paper studies the potential impact on securities settlement systems (SSSs) of a major market disruption, caused by the default of the largest player. A multi-period, multi-security model with intraday credit is used to simulate direct and second round settlement failures triggered by the...

Persistent link: https://www.econbiz.de/10005792365

Systemic Risk: A Survey

de Bandt, Olivier; Hartmann, Philipp - C.E.P.R. Discussion Papers - 2000

related payment and settlement systems. At the heart of systemic risk are contagion effects, various forms of external effects … rigorous models of bank and payment system contagion have now been developed, although a general theoretical paradigm is still … missing. Direct econometric tests of bank contagion effects seem to be mainly limited to the United States. Empirical studies …

Persistent link: https://www.econbiz.de/10005114152

Bank Networks: Contagion, Systemic Risk and Prudential Policy

Aldasoro, Iñaki; Delli Gatti, Domenico; Faia, Ester - C.E.P.R. Discussion Papers - 2015

traded quantities are determined by means of a matching algorithm. Contagion occurs through liquidity hoarding, interbank …

Persistent link: https://www.econbiz.de/10011252622

Aggregate Risk and the Choice between Cash and Lines of Credit

Acharya, Viral V; Almeida, Heitor; Campello, Murillo - C.E.P.R. Discussion Papers - 2012

We model corporate liquidity policy and show that aggregate risk exposure is a key determinant of how firms choose between cash and bank credit lines. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit...

Persistent link: https://www.econbiz.de/10011083590

Caught between Scylla and Charybdis? Regulating bank leverage when there is rent-seeking and risk-shifting

Acharya, Viral V; Mehran, Hamid; Thakor, Anjan - C.E.P.R. Discussion Papers - 2012

We consider a model in which banks face two moral hazard problems: 1) asset substitution by shareholders, which can occur when banks make socially-inefficient, risky loans; and 2) managerial under-provision of effort in loan monitoring. The privately-optimal level of bank leverage is neither too...

Persistent link: https://www.econbiz.de/10011084299