An agent-based model for financial vulnerability

Journal of Economic Interaction and Coordination - Tập 13 - Trang 433-466 - 2017
Richard Bookstaber1, Mark Paddrik1, Brian Tivnan2
1Office of Financial Research, United States Department of Treasury, Washington, USA
2MITRE Corporation, McLean, USA

Tóm tắt

This study addresses a critical regulatory shortfall by developing a platform to extend stress testing from a microprudential approach to a dynamic, macroprudential approach. This paper describes the ensuing agent-based model for analyzing the vulnerability of the financial system to asset- and funding-based fire sales. The model captures the dynamic interactions of agents in the financial system extending from the suppliers of funding through the intermediation and transformation functions of the bank/dealers to the financial institutions that use the funds to trade in the asset markets. The model replicates the key finding that it is the reaction to initial losses, rather than the losses themselves, that determine the extent of a crisis. By building on a detailed mapping of the transformations and dynamics of the financial system, the agent-based model provides an avenue toward risk management that can illuminate the pathways for the propagation of key crisis dynamics such as fire sales and funding runs.

Tài liệu tham khảo

Acharya VV, Gromb D, Yorulmazer T (2012) Imperfect competition in the interbank market for liquidity as a rationale for central banking. Macroecon Am Econ J 4(2):184–217 Adrian T, Shin HS (2010) Liquidity and leverage. J Financ Intermed 19(3):418–437 Adrian T, Shin HS (2014) Pro-cyclical leverage and value-at-risk. Rev Financ Stud 27(2):373–403 Battiston S, Puliga M, Kaushik R, Tasca P, Caldarelli G (2012) Debtrank: too central to fail? Financial networks, the fed and systemic risk. Sci Rep 2:541 Basel Committee on Banking Supervision (2010) Basel III: a global regulatory framework for more resilient banks and banking systems. Basel Committee on Banking Supervision, Basel Basel Committee on Banking Supervision (2013) Basel III: the liquidity coverage ratio and liquidity risk monitoring tools. Basel Committee on Banking Supervision, Basel Bigbee AJ, Brady SM, Harvey CE, Bookstaber R, Burke CD, Henscheid ZA, Koehler MT, McMahon MT, Paddrik ME, Slater D, Tivnan BF (2015) An agent-based model for financial vulnerability: supplementary materials. OFR Working Papers Supplement Bluhm M, Faia E, Krahnen JP (2014) Endogenous banks’ networks, cascades and systemic risk. SAFE Working Paper Bookstaber R (2007) A demon of our own design: markets, hedge funds, and the perils of financial innovation. Wiley, New Jersey Bookstaber R, Cetina J, Feldberg G, Flood M, Glasserman P, et al (2013) Stress tests to promote financial stability: assessing progress and looking to the future. Office of Financial Research Working Paper, 10 Brunnermeier MK, Pedersen LH (2009) Market liquidity and funding liquidity. Rev Financ Stud 22(6): 2201–2238 Caccioli F, Catanach TA, Farmer JD (2012) Heterogeneity, correlations and financial contagion. Adv Complex Syst 15(02):1250058 Chen R-R, Chidambaran N, Imerman MB, Sopranzetti BJ (2014) Liquidity, leverage, and Lehman: a structural analysis of financial institutions in crisis. J Bank Financ 45:117–139 Cifuentes R, Ferrucci G, Shin HS (2005) Liquidity risk and contagion. J Eur Econ Assoc 3(2–3):556–566 Copeland AM, Martin A, Walker M (2010) The tri-party repo market before the 2010 reforms. Report, FRB of New York Staff, p 477 Danielsson J, Shin HS, Zigrand J-P (2012) Endogenous and systemic risk. Quantifying systemic risk. University of Chicago Press, Chicago, pp 73–94 Diamond DW and Rajan RG (2001) Banks, short-term debt and financial crises: theory, policy implications and applications. In Carnegie-Rochester conference series on public policy, vol 54, p 37–71. Elsevier, London Drehmann M, Nikolaou K (2013) Funding liquidity risk: definition and measurement. J Bank Financ 37(7):2173–2182 Federal Reserve Board (2013a) Comprehensive capital analysis and review 2013: assessment frame- work and results. Federal Reserve, Washington DC. www.federalreserve.gov/bankinforeg/ccar-2013-results-20130314.pdf Federal Reserve Board (2013b) Dodd-frank act stress test 2013: aupervisory stress test methodology and results. Federal Reserve, Washington DC. www.federalreserve.gov/newsevents/press/bcreg/dfast2013results, 20130314 Fostel A, Geanakoplos J (2008) Leverage cycles and the anxious economy (digest summary). Am Econ Rev 98(4):1211–1244 Furfine CH (2003) Interbank exposures: quantifying the risk of contagion. J Money Credit Bank 35(1):111–128 Georg C-P (2013) The effect of the interbank network structure on contagion and common shocks. J Bank Financ 37(7):2216–2228 Gorton G, Metrick A (2012) Securitized banking and the run on repo. J Financ Econ 104(3):425–451 Gorton GB (2010) Slapped by the invisible hand: the panic of 2007. Oxford University Press, Oxford Greenwood R, Landier A, Thesmar D (2015) Vulnerable banks. J Financ Econ 115(3):471–485 Haldane A, May R (2011) Systemic risk in banking ecosystems. Nature 469(7330):351–355 Jorion P (1997) Value at risk. McGraw-Hill, New York Khandani AE, Lo AW (2011) What happened to the quants in August 2007? Evidence from factors and transactions data. J Financ Mark 14(1):1–46 Kleijnen JP, Sanchez SM, Lucas TW, Cioppa TM (2005) State-of-the-art review: a users’ guide to the brave new world of designing simulation experiments. INFORMS J Comput 17(3):263–289 Kyle AS (1985) Continuous auctions and insider trading. Econom J Econome Soc 53(6):1315–1335 Ladley D (2013) Contagion and risk-sharing on the inter-bank market. J Econ Dyn Control 37(7):1384–1400 Lowenstein R (2000) When genius failed: the rise and fall of long-term capital management. Random House Trade Paperbacks Maslov S (2000) Simple model of a limit order-driven market. Phys. A Stat. Mech. Appl. 278(3):571–578 Office of Financial Research (2012) Annual report Office of Financial Research (2013) Annual report Office of Financial Research (2014) Annual report Sato AH and Tasca P (2015) Dynamic interaction between asset prices and bank behavior: a systemic risk perspective. arXiv preprint: arXiv:1504.07152 Shleifer A, Vishny R (2011) Fire sales in finance and macroeconomics. J Econ Perspect 25(1):29–48 Stein JC (2009) Presidential address: sophisticated investors and market efficiency. J Financ 64(4):1517–1548 Stoll HR (1978) The pricing of security dealer services: an empirical study of Nasdaq stocks. J Financ 33(4):1153–1172 Summers L, Greenspan A, Levitt A, Ranier W (1999) Over-the-counter derivatives markets and the commodity exchange act. Report of the president’s working group on financial markets. November, Washington DC Tasca P, Mavrodiev P, Schweitzer F (2014) Quantifying the impact of leveraging and diversification on systemic risk. J Financ Stab 15:43–52 Tasca P, Battiston S (2016) Market procyclicality and systemic risk. Quant Financ 16(8):1–17 Thurner S, Farmer JD, Geanakoplos J (2012) Leverage causes fat tails and clustered volatility. Quant Financ 12(5):695–707 Tsatskis I (2012) Systemic losses in banking networks: indirect interaction of nodes via asset prices. Available at SSRN 2062174 Upper C, Worms A (2004) Estimating bilateral exposures in the German interbank market: is there a danger of contagion? Eur Econ Rev 48(4):827–849 Wells S (2002) UK interbank exposures: systemic risk implications. Financ Stab Rev 13(12):175–182