Interbank money markets play a fundamental role in financial systems but they can also be a channel through which problems in one institution can spread to the remaining ones. In particular, the potential for contagion stemming from interbank money markets is closely related with the pattern of...

We propose a novel mechanism to facilitate understanding of systemic risk in financial markets. The literature on systemic risk has focused on two mechanisms, common shocks and domino-like sequential default. Our approach is a formal model that provides an intellectual combination of the two by...

The paper provides a simple model for interbank loans. Since interbank trades are usually over-the-counter transactions, we use a bilateral bargaining model and apply the Nash bargaining solution. We determine the threat points and the bargaining frontier of debtor and creditor banks. We ask...

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...

The Article first presents a brief history or survey of the some of the earlier problems that associate with China’s banking and financial institutions. The Article then addresses specific problems, in the context of the rules, procedures, and practices of the banking and finance sector, which...

We study liquidity transfers between banks through the interbank borrowing and asset sale markets when (i) surplus banks providing liquidity have market power, (ii) there are frictions in the lending market due to moral hazard, and (iii) assets are bank-specific. We show that when the outside...

Despite recent volatility and constraints in secondary market funding, analysts have ascribed substantial value creation to the securitization of commercial mortgages. Such value creation likely emanates from enhancements to originator liquidity, tranching of claims on cash-flows, gains from...

This paper concerns an alternative of monetary policy operational framework for the newly created European Central Bank (ECB). Composed of 12 central banks (many of them with an outstanding prestige) it must create the new quality as the emerging single central bank of the large monetary union....

This thesis consists of four self-contained papers related to banking, credit markets and financial stability. Paper [I] presents a credit market model and finds, using an agent based modeling approach, that credit crunches have a tendency to occur; even when credit markets are almost entirely...