Staff working papers
Quantifying Contagion Risk in Funding Markets: A Model-Based Stress-Testing ApproachWe propose a tractable, model-based stress-testing framework where the solvency risks, funding liquidity risks and market risks of banks are intertwined.
Filling in the Blanks: Network Structure and Interbank ContagionThe network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures.
The Safety of Government DebtWe examine the safety of government bonds in the presence of Knightian uncertainty amongst financial market participants. In our model, the information insensitivity of government bonds is driven by strategic complementarities across counterparties and the structure of trading relationships.
The ‘Celtic Crisis’: Guarantees, Transparency and Systemic Liquidity RiskBank liability guarantee schemes have traditionally been viewed as costless measures to shore up investor confidence and prevent bank runs. However, as the experiences of some European countries, most notably Ireland, have demonstrated, the credibility and effectiveness of these guarantees are crucially intertwined with the sovereign’s funding risks.
Financial System Review articles
June 12, 2014