Contagion at the interbank market with stochastic LGD

Arbeitspapier

This paper investigates contagion at the German interbank market under the assumption of a stochastic loss given default (LGD). We combine a unique data set about the LGD of interbank loans with data about interbank exposures. We find that the frequency distribution of the LGD is u-shaped. Under the assumption of a stochastic LGD, simulation results show a more fragile banking system than under the assumption of a constant LGD. There are three types of banks concerning their tendency to trigger contagion: banks with strongly varying impact, banks whose impact is relatively constant, and banks with no direct impact.

Object Details

• ISBN: 978-3-86558-703-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 2 ; No. 2011,06

Classification and Topics

• Classification: Wirtschaft ; General Equilibrium and Disequilibrium: Financial Markets ; Money and Interest Rates: Forecasting and Simulation: Models and Applications ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: interbank market ; contagion ; stochastic LGD

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Memmel, Christoph ; Sachs, Angelika ; Stein, Ingrid
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/45176
• Last update: 10.03.2025, 11:43 AM CET