Abstract. The bilateral netting of mutual obligations is an institutional arrangement employed in payment systems to reduce settlement risks. In this paper we explore its advantages and pitfalls when applied to an interbank lending market, in which banks extend credit to – and borrow from – other banks. Bilateral netting considerably reduce the potential for default cascades over an interbank network whenever the source of contagion is a negative shock to the assets of a randomly chosen bank. When the shock hits the liability side of the balance sheet, the mitigating effect of a bilateral netting agreement depends critically on the topological characteristics of the interbank network, however

Bilateral Netting and Contagion Dynamics in Financial Networks / Gaffeo, Edoardo; Gobbi, Lucio. - STAMPA. - (2015), pp. 369-376. [10.1007/978-3-319-19638-1_42]

Bilateral Netting and Contagion Dynamics in Financial Networks

Gaffeo, Edoardo;Gobbi, Lucio
2015-01-01

Abstract

Abstract. The bilateral netting of mutual obligations is an institutional arrangement employed in payment systems to reduce settlement risks. In this paper we explore its advantages and pitfalls when applied to an interbank lending market, in which banks extend credit to – and borrow from – other banks. Bilateral netting considerably reduce the potential for default cascades over an interbank network whenever the source of contagion is a negative shock to the assets of a randomly chosen bank. When the shock hits the liability side of the balance sheet, the mitigating effect of a bilateral netting agreement depends critically on the topological characteristics of the interbank network, however
2015
Distributed Computing and Artificial Intelligence, 12th International Conference. Advances in Intelligent Systems and Computing
Cham
Springer
978-3-319-19637-4
Gaffeo, Edoardo; Gobbi, Lucio
Bilateral Netting and Contagion Dynamics in Financial Networks / Gaffeo, Edoardo; Gobbi, Lucio. - STAMPA. - (2015), pp. 369-376. [10.1007/978-3-319-19638-1_42]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/252412
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