Here.
The focus of this paper has been on what the financial networks literature has to say about the relationship between interconnectedness and financial stability. Do more interbank connections promote stability through risk sharing, or do they lead to greater fragility by creating channels for contagion? One of the key lessons of the literature is that this question cannot be answered without considering other factors that contribute to contagion, including leverage levels and heterogeneity in size. As we have seen the interaction between these factors and the network topology is quite complex and not fully understood even at a theoretical level.
From:
Paul Glasserman
Columbia Business School
H. Peyton Young
University of Oxford
The focus of this paper has been on what the financial networks literature has to say about the relationship between interconnectedness and financial stability. Do more interbank connections promote stability through risk sharing, or do they lead to greater fragility by creating channels for contagion? One of the key lessons of the literature is that this question cannot be answered without considering other factors that contribute to contagion, including leverage levels and heterogeneity in size. As we have seen the interaction between these factors and the network topology is quite complex and not fully understood even at a theoretical level.
From:
Paul Glasserman
Columbia Business School
H. Peyton Young
University of Oxford