Heider, Florian; Hoerova, Marie; Holthausen, Cornelia - C.E.P.R. Discussion Papers - 2010
We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow … the interbank market. Several interbank market regimes can arise: i) normal state with low interest rates; ii) turmoil … explanation for observed developments in the interbank market before and during the 2007-09 financial crisis (dramatic increases …