dc.contributor.author | ALLEN, Franklin | |
dc.contributor.author | BABUS, Ana | |
dc.contributor.author | CARLETTI, Elena | |
dc.date.accessioned | 2010-07-06T12:29:42Z | |
dc.date.available | 2010-07-06T12:29:42Z | |
dc.date.issued | 2010 | |
dc.identifier.issn | 1725-6704 | |
dc.identifier.uri | https://hdl.handle.net/1814/14256 | |
dc.description | This Working Paper (EUI ECO 2010/30) is a revised version of EUI ECO Working Paper 2010/26. | en |
dc.description.abstract | We develop a model where institutions form connections through swaps of projects
in order to diversify their individual risk. These connections lead to two different network
structures. In a clustered network groups of financial institutions hold identical
portfolios and default together. In an unclustered network defaults are more dispersed.
With long term finance welfare is the same in both networks. In contrast, when short
term finance is used, the network structure matters. Upon the arrival of a signal
about banks’ future defaults, investors update their expectations of bank solvency. If
their expectations are low, they do not roll over the debt and there is systemic risk
in that all institutions are early liquidated. We compare investors’ rollover decisions
and welfare in the two networks. | en |
dc.format.mimetype | application/pdf | |
dc.language.iso | en | en |
dc.relation.ispartofseries | EUI ECO | en |
dc.relation.ispartofseries | 2010/30 | en |
dc.rights | info:eu-repo/semantics/openAccess | |
dc.title | Financial Connections and Systemic Risk | en |
dc.type | Working Paper | en |
dc.neeo.contributor | ALLEN|Franklin|aut| | |
dc.neeo.contributor | BABUS|Ana|aut| | |
dc.neeo.contributor | CARLETTI|Elena|aut|EUI70001 | |
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