Varlıklar, komşu riskleri ve banka ağları

This thesis consists of two essays discussing shock propagation and counterparty risk in financial networks. The first essay explores the resilience of financial networks to systemic shocks under regulatory solvency constraints. We generalize the contagion under fire sale model of Cifuentes, Ferucci and Shin (2005) by allowing financial institutions to be connected through assets they hold in their portfolios. We simulate the model under different combinations of debt and asset networks and observe how shocks spread across markets. In the second essay, we provide a dynamic model of financial contagion to identify the source of systemic risk when banks can borrow from each other as well as from external creditors to invest in a risky portfolio. Our framework differs from earlier work as it describes how a bank's value function depends on counterparties' risky behavior. We analyze the implications of the model in the case of a ring network of banks where liabilities of a bank are held by a single counterparty. We show that the network effect is positive for the banks whose risky investment is less than the average of the rest. In other words, we show that the counterparties' risky behavior increases the probability of default of a bank. We also show that the uniform Value at Risk (VaR) constraint doesn't reflect the real probability of default when the network effect is considered. Therefore, we propose a policy function which assigns different VaR values for each bank in the network, and obtain that the target level imposed by the social planner is achieved.