Work

Contagion in the Interbank Market with Stochastic Loss Given Default

Year: 2012

Type: article

Abstract: This paper investigates contagion in the German interbank market under the assumption of a stochastic loss given default (LGD). We combine a unique data set about the LGD of interbank loans with detailed data about interbank exposures. We find that the frequency distribution of the LGD is markedly u-shaped. Our simulations show that contagion in the German interbank market is not unlikely. Furthermore, we find that taking into account banks ’ off-balance sheet exposures has a remarkable effect on the results of the contagion analysis.

Authors: Christoph Memmel, Angelika Sachs, Ingrid Stein

Institutions: Deutsche Bundesbank, Ludwig-Maximilians-Universität München, European Central Bank

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W132230335

FWCI: 4.24

Cites: 28

Cited by: 23

Related to: 10