Fitness model for tiered structure in the interbank market

Tiered structure is observed in a range of countries' banking systems. In that case, relatively few first‐tier banks are not only interconnected, but are connected with second‐tier banks, whereas second‐tier banks are almost exclusively connected with first‐tier banks. This study uses the theory of complex networks to quantitatively characterize the formation of tiered structure in banking systems. The interbank market network model constructed in this article reproduces tiered structure and various statistical properties, namely, a small‐world property and a disassortative mixing property as well as a reciprocal property. This network modeling of the interbank market could be an efficient way to understand the bank behavior in the interbank market. © 2012 Wiley Periodicals, Inc. Complexity, 2012     

Rollover risk and endogenous network dynamics

Using a dynamic network formation model, solved numerically, we study banks’ rollover decisions. We find that when the existence of linkages between market participants generates an informational externality, the newly formed network is conditioned by past architectures. Moreover, this inertia is strongly dependent on macroeconomic conditions, such as investors’ risk appetite. Simulations show that for intermediate values of the risk appetite’s parameter the financial network exhibits tipping points, i.e., the inability to maintain a threshold number of linkages may push the market into a gridlock. In this context, we study also how policy instruments, such as taxes and subsidies, affects debt rollover. Since a reduction in the policy level plays the same role as an improvement in economic fundamentals, the creation of interbank connections can be stimulated by it. Thus, in order to restart lending after a major stress situation in the interbank market a considerable reduction in the policy level is required, advising a counter-cyclical policy similar to the ones recently proposed with respect to capital requirements.     

Assessing interbank contagion using simulated networks

This paper presents a new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures. Our model can be used to simulate and assess interbank contagion effects on banking sector soundness and resilience. We find a strongly non-linear pattern across the distribution of simulated networks, whereby only for a small percentage of networks the impact of interbank contagion will substantially reducoe average solvency of the system. In the vast majority of the simulated networks the system-wide contagion effects are largely negligible. The approach furthermore enables to form a view about the most systemic banks in the system in terms of the banks whose failure would have the most detrimental contagion effects on the system as a whole. Finally, as the simulation of the network structures is computationally very costly, we also propose a simplified measure—a so-called Systemic Probability Index—that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations but at the same time is less costly to compute. We find that the SPI is broadly consistent with the results from the simulated network structures.     

银行间债券市场的外部效率:基于商业银行的视角

以参与我国银行间债券市场的商业银行为研究对象,运用面板数据模型检验银行间债券市场的外部效率对于商业银行经营绩效的影响.实证结果表明:我国银行间债券市场的发展对于商业银行的盈利能力和流动性管理水平均有较强的外部正效率,而对于商业银行传统盈利模式和风险管理则具有负面影响.建议商业银行应利用银行间债券市场的外部正效率提高其资产负债管理水平,通过提升自身经营管理水平来降低银行间债券市场外部负效率对自身的影响;此外监管当局还应该降低小型金融机构进入银行间债券市场的门槛,以发挥该市场外部正效率对化解区域金融风险的作用.     

The network structure and systemic risk in the global non-life insurance market

This paper contributes to the literature on systemic risk by assessing the systemic importance of insurers in the global non-life insurance market. First, we estimate the bilateral reinsurance claims matrix using the aggregate outstanding reinsurance data from ISIS and theoretically analyze the interconnectedness in the global reinsurance network using network indicators. The robustness of the estimated matrix is fully assured by sensitivity analysis. Second, we theoretically analyze the contagious defaults introducing the Eisenberg–Noe framework. Reinsurers play a dominant role in the reinsurance network and most of them are included in our data sample. The network analysis finds that some reinsurers with large centrality measures are central in the hierarchical structure of the network. The default analysis shows the occurrences of many stand-alone defaults and only one contagious default via the global reinsurance network after the global financial crisis. In addition, one stress test based on a hypothetical severe stress scenario predicts a few occurrences of contagious defaults in the future. It follows from these analyses that systemic risk via the global reinsurance network is relatively restricted in the global non-life insurance market. In conclusion, our methodology would help supervisory authorities develop an assessment approach for interconnectedness in the global reinsurance network and aid the implementation of insurer stress tests for default contagion.     

银行间与交易所国债市场的信息溢出效应研究

用VAR模型的预测误差方差分解方法和格兰杰因果检验方法研究中国银行间和交易所国债市场信息溢出效应的方向、水平和动态趋势及其原因。研究表明:银行间和交易所国债市场之间收益与波动溢出效应均呈现上升动态特征;在收益溢出效应中银行间是国债市场信息传导者,在波动溢出效应中交易所是国债市场信息传导者;利率变化和市场流动性显著负向影响收益总溢出和波动总溢出。     

Financial contagion: extending the exposures network of the Mexican financial system

Direct contagion has been widely studied in recent years and little evidence has been found to be relevant to the study of systemic risk. However, we argue that this limited contagion effect might be associated with a lack of relevant data. A common assumption for the estimation of the matrices of exposures is to apply the maximum entropy principle to deal with data gaps; such an assumption might lead to an underestimation of contagion risk. In this paper, there are no data gaps and the information set is extended from interbank exposures alone to exposures among most of the financial intermediaries in the Mexican financial system (we even include exposures to some international foreign banks). Naturally, the contagion risk of an extended network of exposures changes with respect to the interbank exposures network, as there are many more institutions which can be the source of contagion and there are more institutions which can fail due to contagion. The most important contribution of this paper is that it provides evidence on financial contagion with an extended exposures network under stressful conditions. The results presented here support the international efforts by the Bank for International Settlements, the International Monetary Fund and the Financial Stability Board to increase the amount of information available which can be used to assess systemic risk and contagion based on exposures and funding data.     

中国银行系统的宏观审慎监管研究

全球金融危机爆发后,对银行系统实行审慎监管已成为国内外学者及相关监管机构的共识。但目前银行系统的监管研究多为微观审慎监管,宏观审慎监管研究缺乏,尤其是对中国银行网络系统进行动态建模并进行宏观审慎监管的定量研究未见。本文首先利用中国2008至2015年16家上市银行的实际数据构建动态的中国银行网络系统模型,然后使用Component VaR、Incremental VaR、Shapley value EL以及ΔCoVaR四种风险分配机制研究中国银行网络系统的宏观审慎监管方法。研究表明:对中国银行网络系统进行宏观审慎监管能够有效提升其稳定性,并且四种机制相比之下,ΔCoVaR的监管效果最为显著,而Incremental VaR则相对较差。此外,通过宏观审慎资本与银行指标之间的相关性分析,发现Incremental VaR、Shapley value EL以及Component VaR机制下的宏观审慎资本与银行的总资产具有一定的相关性,此时宏观审慎资本可以根据银行的总资产来设置;而ΔCoVaR机制下则不相关,因此宏观审慎资本可以依据各银行的系统性风险贡献大小来设置。     

Network analysis of the e-MID overnight money market: the informational value of different aggregation levels for intrinsic dynamic processes

In this paper, we analyze the network properties of the Italian e-MID data based on overnight loans during the period 1999–2010. We show that the networks appear to be random at the daily level, but contain significant non-random structure for longer aggregation periods. In this sense, the daily networks cannot be considered as being representative for the underlying ‘latent’ network. Rather, the development of various network statistics under time aggregation points toward strong non-random determinants of link formation. We also identify the global financial crisis as a significant structural break for many network measures.     

An optimization algorithm for the clearing of interbank payments

We consider the clearing of interbank payments under limited amount of money used by banks for the maintenance of the clearing process. We show that the corresponding discrete optimization problem is non-approximable and propose a fast heuristic for solving the problem. The results of computational experiments demonstrate the high quality of solutions.     

Strategic foreign reserves risk management: Analytical framework

We present an analytical framework for active foreign exchange reserves management that integrates risk-return objectives with macroeconomic, macro-prudential and sovereign debt management concerns. Our framework allows for very general objective functions, does not restrict the class of eligible stochastic processes or limit the investment universe, and can incorporate many types of macroeconomic concerns. It incorporates several kinds of risk constraints in order to obtain benchmarks satisfying possible central bank requirements of safety, liquidity, returns, and stability. Feedback between outcomes and decisions is easy using tools that reshape distributions and functions of the outcomes. And the model can be run on a PC-based platform. We apply the framework to several common reserves management problems focusing especially on the formulation of model equations, generation of trees and estimation of density functions of outcomes. We compare our approach to those used by many central banks and discuss advantages to our approach.     

Prediction of commercial bank failure via multivariate statistical analysis of financial structures: The Turkish case

The objective of this paper is to propose a methodological framework for constructing the integrated early warning system (IEWS) that can be used as a decision support tool in bank examination and supervision process for detection of banks, which are experiencing serious problems. Sample and variable set of the study contains 40 privately owned Turkish commercial banks (21 banks failed during the period 1997–2003) and their financial ratios. Well known multivariate statistical technique (principal component analysis), was used to explore the basic financial characteristics of the banks, and discriminant, logit and probit models were estimated based on these characteristics to construct IEWS. Also, importance of early warning systems in bank examination was evaluated with respect to cost of failure. Results of the study show that, if IEWS was effectively employed in bank supervision, it can be possible to avoid from the bank restructuring costs at a significant amount of rate in the long run.     

A latent process model for the pricing of corporate securities

We propose a structural model with a joint process of tangible assets (marker) and firm status for the pricing of corporate securities. The firm status is assumed to be latent or unobservable, and default occurs when the firm status process reaches a default threshold at the first time. The marker process is observable and assumed to be correlated with the latent firm status. The recovery upon default is a fraction of tangible assets at the time of default. Our model can evaluate both the corporate debt and equity to fit their market prices in a unified framework. When the two processes are perfectly correlated, our model is reduced to the seminal Black–Cox model. Numerical examples are given to support the usefulness of our model. A previous version of this paper was presented at the Tsukuba–Stanford workshop held at Stanford University on March 2006. The authors are grateful to participants of the workshop for helpful discussions.     

Measuring bank contagion in Europe using binary spatial regression models

The recent European sovereign debt crisis clearly illustrates the importance of measuring the contagion effects of bank failures. Indeed, to better understand and monitor contagion risk, the European Central Bank has assumed the supervision of the largest banks in each of the member states. We propose a measure of contagion risk based on the spatial autocorrelation parameter of a binary spatial autoregressive model. Using different specifications of the interbank connectivity matrix, we estimate the contagion parameter for banks within the Eurozone, between 1996 and 2012. We provide evidence of high levels of systemic risk due to contagion during the European sovereign debt crisis.     

Decomposing capacity utilization in data envelopment analysis: An application to banks in India

This paper briefly reviews the existing methods of capacity utilization in nonparametric framework from economic perspectives, and then suggests an alternative in the light of limitations therein. In the spirit of work by Coelli et al. [Coelli, T.J., Grifell-Tatje, E., Perelman, S., 2002. Capacity utilisation and profitability: A decomposition of short run profit efficiency. International Journal of Production Economics 79, 261–278], we propose two methods, radial and non-radial, to decompose the input-based physical (technological) capacity utilization into various meaningful components viz., technical inefficiency, ray economic capacity utilization and optimal capacity idleness. A case study of Indian banking industry is taken as an example to illustrate the potential application of these two methods of decomposition. Our two broad empirical findings are that first, competition created after financial sector reforms generates high efficiency growth, and reduces excess capacity; second, the cost gap of the short-run cost from the actual cost is higher for the nationalized banks over the private banks indicating that the former banks, though old, do not reflect their learning experience in their cost minimizing behavior.     

Sampling Truncated Normal,Beta, and Gamma Densities

We consider the Bayesian analysis of constrained parameter and truncated data problems within a Gibbs sampling framework and concentrate on sampling truncated densities that arise as full conditional densities within the context of the Gibbs sampler. In particular, we restrict attention to the normal, beta, and gamma densities. We demonstrate that, in many instances, it is possible to introduce a latent variable which facilitates an easy solution to the problem. We also discuss a novel approach to sampling truncated densities via a “black-box” algorithm, based on the latent variable idea, valid outside of the context of a Gibbs sampler.     

银行网点规模对理财产品市场竞争的影响

网点是银行销售理财产品的主要渠道,网点的规模不仅直接影响着银行在理财产品市场的份额和收入,还通过风险行为影响着理财产品市场的竞争策略与格局。本文以权益类理财产品为研究对象,建立了银行间基于网点的理财产品竞争模型,通过竞争均衡的比较静态分析,发现理财产品的预期收益率受不同发行主体自身网点规模的影响,网点规模小的银行倾向于采取更激进的竞争策略,提供收益率更高的理财产品,以扩展自己的生存空间,即存在收益率溢价现象。然而,小规模银行的风险行为对竞争格局的影响有限,而大规模银行的行为却影响显著,即,理财产品所投资标的资产的风险水平对竞争的影响程度也同样受制于银行的网点规模。本文的分析和结论为我国银行理财产品市场的现状特征提供了理论解释。     

Two time-delay dynamic model on the transmission of malicious signals in wireless sensor network

Deployed in a hostile environment, motes of a Wireless sensor network (WSN) could be easily compromised by the attackers because of several constraints such as limited processing capabilities, memory space, and limited battery life time etc. While transmitting the data to their neighbour motes within the network, motes are easily compromised due to resource constraints. Here time delay can play an efficient role to reduce the adversary effect on motes. In this paper, we propose an epidemic model SEIR (Susceptible–Exposed–Infectious–Recovered) with two time delays to describe the transmission dynamics of malicious signals in wireless sensor network. The first delay accounts for an exposed (latent) period while the second delay is for the temporary immunity period due to multiple worm outbreaks. The dynamical behaviour of worm-free equilibrium and endemic equilibrium is shown from the point of stability which switches under some threshold condition specified by the basic reproduction number. Our results show that the global properties of equilibria also depends on the threshold condition and that latent and temporary immunity period in a mote does not affect the stability, but they play a positive role to control malicious attack. Moreover, numerical simulations are given to support the theoretical analysis.     

Unveiling endogeneity between competition and efficiency in Chinese banks: a two-stage network DEA and regression analysis

Although there is a growing number of research articles investigating the performance in the banking industry, research on Chinese banking efficiency is rather focused on discussing rankings to the detriment of unveiling its productive structure in light of banking competition. This issue is of utmost importance considering the relevant transformations in the Chinese economy over the last decades. This is a development of a two-stage network production process (production and intermediation approaches in banking, respectively) to evaluate the efficiency level of Chinese commercial banks. In the second stage regression analysis, an integrated Multi-Layer Perceptron/Hidden Markov model is used for the first time to unveil endogeneity among banking competition, contextual variables, and efficiency levels of the production and intermediation approaches in banking. The competitive condition in the Chinese banking industry is measured by Panar–Rosse H-statistic and Lerner index under the Ordinary Least Square regression. Findings reveal that productive efficiency appears to be positively impacted by competition and market power. Second, credit risk analysis in older local banks, which focus the province level, would possibly be the fact that jeopardizes the productive efficiency levels of the entire banking industry in China. Thirdly, it is found that a perfect banking competition structure at the province level and a reduced market power of local banks are drivers of a sound banking system. Finally, our findings suggest that concentration of credit in a few banks leads to an increase in bank productivity.

     

Entrepreneurs,Banks and the Monetary Circuit: A Single Period Investigation

Economic fluctuations constitute a serious problem for policy makers and economists. Several theories have been developed to explain their causes. New recent literature has emphasized the idea that the level of income and employment is determined by decisions taken jointly by banks and entrepreneurs. Our aim here is to investigate the increasingly important relationship between banks and entrepreneurs in the monetary circuit. The system considered explicitly models the money supply process, in contrast to the current economic literature, in which money is introduced ex post as an exogenous disturbance. In view of the presence of several parameters, the two-dimensional model is quite complex. A complete analysis of all possible outcomes of the ? -limit sets is performed, and the circumstances under which the system explodes, collapses or tends to an equilibrium are discussed in terms of the model parameters.