Banks, Relative Performance, and Sequential Contagion
We develop a multi-period general equilibrium model of bank deposit, credit, and interim inter-bank loan markets in which banks initially specialize in their choices of debtors, leading to under-diversification, but nevertheless become entwined via inter-bank markets, leading to the fortunes of one...
| Main Authors: | , , , |
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| Format: | Journal article |
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2007
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| _version_ | 1797082978475573248 |
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| author | Tsomocos, D Bhattacharya, S Goodhart, C Sunirand, P |
| author_facet | Tsomocos, D Bhattacharya, S Goodhart, C Sunirand, P |
| author_sort | Tsomocos, D |
| collection | OXFORD |
| description | We develop a multi-period general equilibrium model of bank deposit, credit, and interim inter-bank loan markets in which banks initially specialize in their choices of debtors, leading to under-diversification, but nevertheless become entwined via inter-bank markets, leading to the fortunes of one bank affecting the profits and default rates of the other in a sequential manner. Lack of (full) diversification among credit risks arises in our model owing to a relative profit argument in each banker’s utility function, which is otherwise risk- and default-averse. We examine its implications for the welfare of depositors and debtors. |
| first_indexed | 2024-03-07T01:35:35Z |
| format | Journal article |
| id | oxford-uuid:9511a374-9a2d-40e6-bb62-8fb428648435 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T01:35:35Z |
| publishDate | 2007 |
| record_format | dspace |
| spelling | oxford-uuid:9511a374-9a2d-40e6-bb62-8fb4286484352022-03-26T23:43:40ZBanks, Relative Performance, and Sequential ContagionJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:9511a374-9a2d-40e6-bb62-8fb428648435Saïd Business School - Eureka2007Tsomocos, DBhattacharya, SGoodhart, CSunirand, PWe develop a multi-period general equilibrium model of bank deposit, credit, and interim inter-bank loan markets in which banks initially specialize in their choices of debtors, leading to under-diversification, but nevertheless become entwined via inter-bank markets, leading to the fortunes of one bank affecting the profits and default rates of the other in a sequential manner. Lack of (full) diversification among credit risks arises in our model owing to a relative profit argument in each banker’s utility function, which is otherwise risk- and default-averse. We examine its implications for the welfare of depositors and debtors. |
| spellingShingle | Tsomocos, D Bhattacharya, S Goodhart, C Sunirand, P Banks, Relative Performance, and Sequential Contagion |
| title | Banks, Relative Performance, and Sequential Contagion |
| title_full | Banks, Relative Performance, and Sequential Contagion |
| title_fullStr | Banks, Relative Performance, and Sequential Contagion |
| title_full_unstemmed | Banks, Relative Performance, and Sequential Contagion |
| title_short | Banks, Relative Performance, and Sequential Contagion |
| title_sort | banks relative performance and sequential contagion |
| work_keys_str_mv | AT tsomocosd banksrelativeperformanceandsequentialcontagion AT bhattacharyas banksrelativeperformanceandsequentialcontagion AT goodhartc banksrelativeperformanceandsequentialcontagion AT sunirandp banksrelativeperformanceandsequentialcontagion |