Financial institutions are highly interconnected. Consequently, they form complex systems which are inherently unstable. This paper reviews empirical research on the instability of complex interbank systems. Three network approaches are distinguished: descriptions of interbank exposure networks; simulation and modelling; and the development of new metrics to describe network topology and individual banks’ relative importance. The paper concludes by inferring policy implications and priorities for future research.
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Langfield, S., Soramäki, K. Interbank Exposure Networks. Comput Econ 47, 3–17 (2016). https://doi.org/10.1007/s10614-014-9443-x
- Systemic Risk
- Credit Default Swap
- Eigenvector Centrality
- Geodesic Path
- Interbank Market