A Multiperiod Bank Run Model for Liquidity Risk
We present a new dynamic bank run model for liquidity risk where a financial institution finances its risky assets by a mixture of short- and long-term debt. The financial institution is exposed to insolvency risk at any time until maturity and to illiquidity risk at a finite number of rollover date...
| Main Authors: | , , |
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| Format: | Journal article |
| Language: | English |
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Oxford University Press
2014
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| _version_ | 1826266864585539584 |
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| author | Liang, G Luetkebohmert, E Xiao, Y |
| author_facet | Liang, G Luetkebohmert, E Xiao, Y |
| author_sort | Liang, G |
| collection | OXFORD |
| description | We present a new dynamic bank run model for liquidity risk where a financial institution finances its risky assets by a mixture of short- and long-term debt. The financial institution is exposed to insolvency risk at any time until maturity and to illiquidity risk at a finite number of rollover dates. We compute both insolvency and illiquidity default probabilities in this multiperiod setting using a structural credit risk model approach. Firesale rates can be determined endogenously as expected debt value over current asset value. Numerical results illustrate the impact of various input parameters on the default probabilities. © The Authors 2013. |
| first_indexed | 2024-03-06T20:45:25Z |
| format | Journal article |
| id | oxford-uuid:35b81b44-3a3c-4ea0-bcfc-a8b8451b6d21 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T20:45:25Z |
| publishDate | 2014 |
| publisher | Oxford University Press |
| record_format | dspace |
| spelling | oxford-uuid:35b81b44-3a3c-4ea0-bcfc-a8b8451b6d212022-03-26T13:33:36ZA Multiperiod Bank Run Model for Liquidity RiskJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:35b81b44-3a3c-4ea0-bcfc-a8b8451b6d21EnglishSymplectic Elements at OxfordOxford University Press2014Liang, GLuetkebohmert, EXiao, YWe present a new dynamic bank run model for liquidity risk where a financial institution finances its risky assets by a mixture of short- and long-term debt. The financial institution is exposed to insolvency risk at any time until maturity and to illiquidity risk at a finite number of rollover dates. We compute both insolvency and illiquidity default probabilities in this multiperiod setting using a structural credit risk model approach. Firesale rates can be determined endogenously as expected debt value over current asset value. Numerical results illustrate the impact of various input parameters on the default probabilities. © The Authors 2013. |
| spellingShingle | Liang, G Luetkebohmert, E Xiao, Y A Multiperiod Bank Run Model for Liquidity Risk |
| title | A Multiperiod Bank Run Model for Liquidity Risk |
| title_full | A Multiperiod Bank Run Model for Liquidity Risk |
| title_fullStr | A Multiperiod Bank Run Model for Liquidity Risk |
| title_full_unstemmed | A Multiperiod Bank Run Model for Liquidity Risk |
| title_short | A Multiperiod Bank Run Model for Liquidity Risk |
| title_sort | multiperiod bank run model for liquidity risk |
| work_keys_str_mv | AT liangg amultiperiodbankrunmodelforliquidityrisk AT luetkebohmerte amultiperiodbankrunmodelforliquidityrisk AT xiaoy amultiperiodbankrunmodelforliquidityrisk AT liangg multiperiodbankrunmodelforliquidityrisk AT luetkebohmerte multiperiodbankrunmodelforliquidityrisk AT xiaoy multiperiodbankrunmodelforliquidityrisk |