An agent-based model for financial vulnerability
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