We simulate a model of an interbank market. Each bank faces fluctuations in deposits and a stochastic investment opportunity each period. Invested funds mature with delay. The risk arises of failure due to insufficient liquidity. An interbank market lets participants pool this risk but also...

We simulate interbank lending. Each bank faces fluctuations in deposits and stochastic investment opportunities which mature with delay. This creates the risk of liquidity shortages. An interbank market lets participants pool this risk but also creates the potential for one bank's crisis to...

In financial markets, an excess of buying tends to drive prices up, and an excess of selling tends to drive them down. This is called market impact. Based on a simplified model for market making, it is possible to derive a unique functional form for market impact. This can be used to formulate a...