6533b86ffe1ef96bd12cd479
RESEARCH PRODUCT
Structural contagion and vulnerability to unexpected liquidity shortfalls
Serena SordiAlessandro VercelliCarl ChiarellaSimone Giansantesubject
Organizational Behavior and Human Resource ManagementEconomics and EconometricsSolvencyEconomicsVulnerabilityMarket liquidityfinancial fluctuationsMicroeconomicsComplex dynamicsDiscrete time and continuous timecontagionOrder (exchange)systemic riskEconometricsEconomicsSystemic riskFinite timeheterogeneous agentscomplex dynamicsFinancial fluctuations; contagion; systemic risk; heterogeneous agents; complex dynamicsFinancial fluctuationsdescription
This paper assumes that financial fluctuations are the result of the dynamic interaction between liquidity and solvency conditions of individual economic units. The framework is an extention of Sordi and Vercelli (2012) designed as an heterogeneous agent model which proceeds through discrete time steps within a finite time horizon. The interaction at the micro-level between economic units monitors the spread of contagion and systemic risk, producing interesting complex dynamics. The model is analysed by means of numerical simulations and systemic risk modelling, where local interaction of units is captured and analysed by the bilateral provision of liquidity among units. The behaviour and evolution of economic units are studied for different parameter regimes in order to investigate the relation between units' expectations, liquidity regimes and contagion. Liquidity policy implications are briefly discussed. © 2012 Elsevier B.V.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2012-08-01 | Journal of Economic Behavior & Organization |