We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a...

An epidemiologist calculating the risk of a localised epidemic becoming a global pandemic would investigate every possible channel of contagion from the infected region to the rest of the world. Focusing on, say, the incidence of close human contact would underestimate the pandemic risk if the...

Liquidity has its systemic aspect that is frequently neglected in research and risk management applications. We build a model that focuses on systemic aspects of liquidity and its links with solvency conditions accounting for pertinent interactions between market participants in an agent-based...

A major lesson of the recent financial crisis is that the interbank lending market is crucial for banks that face uncertainty regarding their liquidity needs. This paper examines the efficiency of the interbank lending market in allocating funds and the optimal policy of a central bank in...