Bátiz-Zuk, Enrique; Lopez-Gallo, Fabrizio; Martinez … - 2022
We examine the role of imposing tighter limits on interbank exposures in reducing contagion and aggregate losses. In our model contagion risk arises as a result of the individual idiosyncratic failure of each bank in the banking system. Following Guerrero-Gomez and Lopez-Gallo (2004), we use a...