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Banks and Their Contagion Potential: How Stable Is Banking System?

  • Mitja SteinbacherEmail author
  • Matjaz Steinbacher
  • Matej Steinbacher
Chapter
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 669)

Abstract

We measure contagion potential and stability of banking system on a randomized version of the credit contagion model by Steinbacher M, Steinbacher M, Steinbacher M (2012) Credit contagion in financial markets: a network-based approach. Available via SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2068716. Cited 30 Jan 2013. We introduce two estimators of the contagion potential of banks (liquidity-loss potential and α-criticality index (Steinbacher M, Steinbacher M, Steinbacher M (2012) Credit contagion in financial markets: a network-based approach. Available via SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2068716. Cited 30 Jan 2013)) and introduce Shannon’s entropy as a stability estimator. Our approach is systemic in that it enables an overall estimation of the capacity of the banking system to provide liquidity. Mechanism developed can be employed for measuring systemic risk of banking system as a whole.

Keywords

Banking System Balance Sheet Stability Index Stability Domain Banking Network 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  • Mitja Steinbacher
    • 1
    Email author
  • Matjaz Steinbacher
    • 2
  • Matej Steinbacher
    • 3
  1. 1.Faculty of Business StudiesCatholic InstituteLjubljanaSlovenia
  2. 2.Kiel Institute for The World EconomyKielGermany
  3. 3.University of Donja GoricaPodgoricaMontenegro

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