The credit risk that an individual bank poses to the rest of the financial system depends on its size, the type of exposures it has to the real economy, and its obligations to other institutions. This paper describes a system-wide risk management approach to calibrating individual banks’...

We examine the role of macroeconomic fluctuations, asset market liquidity, and network structure in determining contagion and aggregate losses in a stylised financial system. Systemic instability is explored in a financial network comprising three distinct, but interconnected, sets of agents -...

Banks’ liquidity is a crucial determinant of the adversity of banking crises. In this paper, we consider the effect of fire sales and entry during crises on banks’ ex-ante choice of liquid asset holdings. We consider a setting with limited pledgeability of risky cash flows relative to safe...

This paper develops an analytical model of contagion in financial networks with arbitrary structure. We explore how the probability and potential impact of contagion is influenced by aggregate and idiosyncratic shocks, changes in network structure, and asset market liquidity. Our findings...

When settling their own liabilities and those of their clients, settlement banks rely on incoming payments to fund a part of their outgoing payments. We investigate their behaviour in CHAPS, the United Kingdom’s large-value payment system. Our estimates suggest that in normal times, banks...

We model the unsecured overnight market in the United Kingdom as a network of relationships and examine how the structure has changed over the recent period of crisis. Using established network techniques, we find strong evidence of the existence of a core of highly connected banks alongside a...

Structured credit instruments offer an insight into markets’ perceptions of the extent of future credit defaults. Claims of different seniorities incur losses only if defaults reach different magnitudes, so their relative value offers an insight into the likelihood of losses being of different...

Systemic risk among the network of international banking groups arises when financial stress threatens to criss-cross many national boundaries and expose imperfect international co-ordination. To assess this risk, we apply an information theoretic map equation due to Martin Rosvall and Carl...

An individual bank can put the whole banking system at risk if its losses in response to shocks push losses for the system as a whole above a critical threshold. We determine the contribution of banks to this systemic risk using a generalisation of the Shapley value; a concept originating in...