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- Publisher Website: 10.1287/opre.2015.1402
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Article: Liability concentration and systemic losses in financial networks
Title | Liability concentration and systemic losses in financial networks |
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Authors | |
Keywords | Majorization Systemic risk Financial networks Financial contagion Liability concentration |
Issue Date | 2016 |
Publisher | INFORMS. The Journal's web site is located at http://or.pubs.informs.org |
Citation | Operations Research, 2016, v. 64, n. 5, p. 1121-1134 How to Cite? |
Abstract | © 2016 INFORMS.The objective of this study is to develop a majorization-based tool to compare financial networks with a focus on the implications of liability concentration. Specifically, we quantify liability concentration by applying the majorization order to the liability matrix that captures the interconnectedness of banks in a financial network. We develop notions of balancing and unbalancing networks to bring out the qualitatively different implications of liability concentration on the system's loss profile. We illustrate how to identify networks that are balancing or unbalancing, and we make connections to interbank structures identified by empirical research, such as perfect and imperfect tiering schemes. An empirical analysis of the network formed by the banking sectors of eight representative European countries suggests that the system is either unbalancing or close to it, persistently over time. This empirical finding, along with the majorization results, supports regulatory policies aiming at limiting the size of gross exposures to individual counterparties. |
Persistent Identifier | http://hdl.handle.net/10722/235970 |
ISSN | 2023 Impact Factor: 2.2 2023 SCImago Journal Rankings: 2.848 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Capponi, A | - |
dc.contributor.author | Chen, PC | - |
dc.contributor.author | Yao, DD | - |
dc.date.accessioned | 2016-11-10T07:11:51Z | - |
dc.date.available | 2016-11-10T07:11:51Z | - |
dc.date.issued | 2016 | - |
dc.identifier.citation | Operations Research, 2016, v. 64, n. 5, p. 1121-1134 | - |
dc.identifier.issn | 0030-364X | - |
dc.identifier.uri | http://hdl.handle.net/10722/235970 | - |
dc.description.abstract | © 2016 INFORMS.The objective of this study is to develop a majorization-based tool to compare financial networks with a focus on the implications of liability concentration. Specifically, we quantify liability concentration by applying the majorization order to the liability matrix that captures the interconnectedness of banks in a financial network. We develop notions of balancing and unbalancing networks to bring out the qualitatively different implications of liability concentration on the system's loss profile. We illustrate how to identify networks that are balancing or unbalancing, and we make connections to interbank structures identified by empirical research, such as perfect and imperfect tiering schemes. An empirical analysis of the network formed by the banking sectors of eight representative European countries suggests that the system is either unbalancing or close to it, persistently over time. This empirical finding, along with the majorization results, supports regulatory policies aiming at limiting the size of gross exposures to individual counterparties. | - |
dc.language | eng | - |
dc.publisher | INFORMS. The Journal's web site is located at http://or.pubs.informs.org | - |
dc.relation.ispartof | Operations Research | - |
dc.subject | Majorization | - |
dc.subject | Systemic risk | - |
dc.subject | Financial networks | - |
dc.subject | Financial contagion | - |
dc.subject | Liability concentration | - |
dc.title | Liability concentration and systemic losses in financial networks | - |
dc.type | Article | - |
dc.identifier.email | Chen, PC: pcchen@hku.hk | - |
dc.identifier.authority | Chen, PC=rp02220 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/opre.2015.1402 | - |
dc.identifier.scopus | eid_2-s2.0-84991458182 | - |
dc.identifier.hkuros | 297526 | - |
dc.identifier.volume | 64 | - |
dc.identifier.issue | 5 | - |
dc.identifier.spage | 1121 | - |
dc.identifier.epage | 1134 | - |
dc.identifier.eissn | 1526-5463 | - |
dc.identifier.isi | WOS:000388844400006 | - |
dc.identifier.issnl | 0030-364X | - |