Centrality-based Capital Allocations:

We look at the effect of capital rules on a banking system that is connected through correlated credit exposures and interbank lending. The rules, which combine individual bank characteristics and interconnectivity measures of interbank lending, are to minimize a measure of system-wide losses. Using...

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Bibliographic Details
Main Author: Alter, Adrian (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2014
Series:IMF Working Papers: Working Paper No. 14 / 237
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Summary:We look at the effect of capital rules on a banking system that is connected through correlated credit exposures and interbank lending. The rules, which combine individual bank characteristics and interconnectivity measures of interbank lending, are to minimize a measure of system-wide losses. Using the detailed German Credit Register for estimation, we find capital rules based on eigenvectors to dominate any other centrality measure, followed by closeness. Compared to the baseline case, capital reallocation based on the Adjacency Eigenvector saves about 15% in system losses as measured by expected bankruptcy costs
Physical Description:1 Online-Ressource (40 p)
ISBN:1498315542
9781498315548

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