Agent-based risk assessment model of the European banking network
| Author(s): | PhDr. Tomáš Klinger Ph.D., prof. PhDr. Petr Teplý Ph.D., |
|---|---|
| Type: | Others |
| Year: | 2017 |
| Number: | 0 |
| ISSN / ISBN: | ISSN 1211-3298 |
| Published in: | CERGE-EI Working Papers, Czech Republic |
| Publishing place: | Prague |
| Keywords: | agent-based models, bank, contagion, network models, systemic risk |
| JEL codes: | C63, D85, G21 |
| Suggested Citation: | Klinger, T., Teplý, P. (2017),“Agent-Based Risk Assessment Model of the European Banking Network“. CERGE-EI Working Papers No. 602/2017 |
| Grants: | GACR 17-02509S - Emerging financial risks during a global low interest rate environment VŠE IP100040 |
| Abstract: | The 2007-2009 financial crisis highlighted the vulnerabilities in the global banking system and shifted research focus to the study of systemic risk. Network theory and agent-based simulation have been used to investigate complex banking systems that would be difficult to model analytically. Nevertheless, the difficulty of obtaining accurate data, as well as the computational complexity of running such models, are limiting their ability to capture the complexities that are emerging in real-world scenarios. In this paper, we use an agent-based simulation combined with innovative calibration techniques in order to model the European banking system as accurately as possible. We extend the existing network approach by adding the ability to model banks of different sizes as well as the detailed connections of individual banks across countries. Our model consists of 286 banks in 9 European countries. We believe that the experiments in this model provide valuable insights into systemic risk within the European banking system as well as useful guidelines for creating new policies. |
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