Reconstructing and stress testing credit networks

Ramadiah, Amanah, Caccioli, Fabio and Fricke, Daniel (2019) Reconstructing and stress testing credit networks. Systemic Risk Centre Discussion Papers (89). Systemic Risk Centre, The London School of Economics and Political Science, London, UK.

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Abstract

Financial networks are an important source of systemic risk, but often only partial network information is available. In this paper, we use data on bank-firm credit relationships in Japan and conduct a horse race between different network reconstruction methods in terms of their ability to reproduce the actual credit networks. We then compare the different reconstruction methods in terms of their implied systemic risk levels. In most instances we find that the observed credit network significantly displays the highest systemic risk level. Lastly, we explore different policies to improve the robustness of the system.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.systemicrisk.ac.uk/
Additional Information:	© 2019 The Author(s)
Divisions:	IGA: LSE IDEAS
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions G - Financial Economics > G2 - Financial Institutions and Services > G20 - General G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Date Deposited:	03 Jul 2023 12:18
Last Modified:	14 Sep 2024 04:28
URI:	http://eprints.lse.ac.uk/id/eprint/118938

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