A Dynamic Stochastic Network Model of the Unsecured Interbank Lending Market

Blasques, Francisco; Bräuning, Falk; Lelyveld, Iman van

doi:10.2139/ssrn.2390828

Cited by 9 publications

(8 citation statements)

References 45 publications

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“…The transaction-level data set thus has the time, volume and price of all transactions involving at least one Dutch bank. This data has been analyzed further in Blasques et al (2015).…”

Section: Overnight Interbank Loansmentioning

confidence: 99%

The missing links: A global study on uncovering financial network structures from partial data

Anand

Lelyveld

Banai

et al. 2018

Journal of Financial Stability

136

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Capturing financial network linkages and contagion in stress test models are important goals for banking supervisors and central banks responsible for micro-and macroprudential policy. However, granular data on financial networks is often lacking, and instead the networks must be reconstructed from partial data. In this paper, we conduct a horse race of network reconstruction methods using network data obtained from 25 different markets spanning 13 jurisdictions. Our contribution is two-fold: first, we collate and analyze data on a wide range of financial networks. And second, we rank the methods in terms of their ability to reconstruct the structures of links and exposures in networks.

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“…The transaction-level data set thus has the time, volume and price of all transactions involving at least one Dutch bank. This data has been analyzed further in Blasques et al (2015).…”

Section: Overnight Interbank Loansmentioning

confidence: 99%

The missing links: A global study on uncovering financial network structures from partial data

Anand

Lelyveld

Banai

et al. 2018

Journal of Financial Stability

136

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“…Since we have simply imposed an ad hoc relationship-dependent rule for the lending rate, no further mechanism exists that would guarantee that the resulting degree of heterogeneity of lending rates is sufficient in the long run to neutralise completely the asymmetric flows of interest payments within the banking system. 7 It would, therefore, be interesting to replace the present ad hoc rule for relationship-based interest rates by a behavioural analysis along the lines of the bargaining approach put forward by Halaj and Kok (2013) and Blasques et al (2014) to see whether systematic tendencies towards tolerable levels of interest rates emerge that guarantee survival of the peripherical borrowers.…”

Section: The Role Of Interest Ratesmentioning

confidence: 99%

Emergence of a core-periphery structure in a simple dynamic model of the interbank market

Lux

2015

Journal of Economic Dynamics and Control

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Registro de acceso restringido Este recurso no está disponible en acceso abierto por política de la editorial. No obstante, se puede acceder al texto completo desde la Universitat Jaume I o si el usuario cuenta con suscripción. Registre d'accés restringit Aquest recurs no està disponible en accés obert per política de l'editorial. No obstant això, es pot accedir al text complet des de la Universitat Jaume I o si l'usuari compta amb subscripció. Restricted access item This item isn't open access because of publisher's policy. The full--text version is only available from Jaume I University or if the user has a running suscription to the publisher's contents.

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“…Differently from the seminal work by Allen and Gale (2000) both papers show that, under certain conditions, complete claims structures may be less robust than incomplete ones. In Leitner (2005) the whole network may collapse if liquidity is concentrated in a too small group of banks (see also Babus (2014), in't Veld, van der Leij, andHommes (2014), and Blasques, Bräuning, and van Lelyveld (2014)). More recently, Glode and Opp (2014) study intermediation chains as a means to overcome large asymmetric information.…”

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confidence: 99%

A Network View on Interbank Market Freezes

Gabrieli

Georg

2014

SSRN Journal

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Reproduction permitted only if source is stated.ISBN 978-3-95729-108-0 (Printversion) Non-technical summary Research QuestionThe insolvency of the US investment bank Lehman Brothers on 15 September 2008 prompted widespread fears of an interbank market freeze in the euroarea. The eurosystem acted swiftly by adopting a set of "emergency measures", including a change of the monetary policy framework from a variable-rate auction-based tender system to a fixed-rate full-allotment regime. Since interbank markets are over-the-counter markets, studying them requires transaction-level payment system data which only recently became available. In this paper, we use a novel and unique dataset of all transactions settled between all European banks to answer a number of policy relevant questions about the developments in the interbank market around the Lehman insolvency. Was there actually a market freeze? If so, was it driven by concerns about counterparty risk? Did banks hoard liquidity as a consequence? How did the structure of the interbank market change as a result of the Lehman insolvency? Does the network structure matter for banks' access to liquidity? And did the "emergency measures" adopted by the Eurosystem stabilize the interbank market? ContributionIn this paper we provide an analysis of a large exogenous shock to the euroarea interbank market. We study how the reallocation of liquidity in the interbank market was affected by the shock on two different levels. On the aggregate level we are the first to complement existing empirical studies of the overnight interbank market by simultaneously studying the dynamics in the term segment. This allows us to identify the market mechanism that caused the turmoil in the euroarea interbank market. By taking a network view we add a completely novel structural dimension to the empirial literature on market freezes. ResultsFirst, we show that only the term segments of the interbank market exhibited a substantial drop in turnover, reminiscent of a market freeze. Banks engage in what can best be described as maturity shortening, which leads to an increase of lending in the overnight segment. Second, we put the structural change of the interbank network structure due to the Lehman insolvency and the Eurosystem's "emergency measures" in the context of the novel literature studying the effectiveness of financial networks. We show that the Lehman insolvency leads to a shrinking of the interbank network that was exacerbated by the "emergency measures" of the eurosystem that replaced a sizeable part of the interbank market with the central bank's balance sheet. The resulting network structure is likely to be less efficient than the network structure before the Lehman insolvency. Finally, we show that there is substantial heterogeneity in banks' access to liquidity, depending on the bank's position within the interbank network. AbstractWe study the liquidity allocation among European banks around the Lehman insolvency using a novel dataset of all interbank loans settled via the Euros...

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A Dynamic Stochastic Network Model of the Unsecured Interbank Lending Market

Cited by 9 publications

References 45 publications

The missing links: A global study on uncovering financial network structures from partial data

The missing links: A global study on uncovering financial network structures from partial data

Emergence of a core-periphery structure in a simple dynamic model of the interbank market

A Network View on Interbank Market Freezes

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