Dynamic Interaction Between Asset Prices and Bank Behavior: A Systemic Risk Perspective
Risk Management
2017-02-24 v3 Computational Finance
Abstract
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking system and credit risk from their lending in the interbank market. By and large, both risks increase during severe financial turmoil. Under this scenario, the paper shows the conditions under which both the individual and the systemic default tend to coincide.
Keywords
Cite
@article{arxiv.1504.07152,
title = {Dynamic Interaction Between Asset Prices and Bank Behavior: A Systemic Risk Perspective},
author = {Aki-Hiro Sato and Paolo Tasca and Takashi Isogai},
journal= {arXiv preprint arXiv:1504.07152},
year = {2017}
}
Comments
26 pages, 35 figures, 21st Computing in Economics and Finance (CEF2015)