The news correspondents obtained a quote from the research from the University of London, "The banks are connected through an interbank lending network and, whenever a bank is distressed, its creditor cannot expect the loan from the distressed bank to be repaid, potentially becoming distressed themselves. We solve the problem analytically for a homogeneous system and test the robustness and generality of the results with simulations of more complex systems. We investigate the parameter space and the corresponding distribution of operating banks mapping the conditions under which the whole system is stable or unstable. This allows us to determine how financial stability of a banking system is influenced by regulatory decisions, such as leverage; we discuss the effect of central bank actions, such as quantitative easing and we determine the cost of rescuing a distressed banking system using re-capitalisation."
According to the news reporters, the research concluded: "Finally, we estimate the stability of the
For more information on this research see: Systemic Losses Due to Counterparty Risk in a Stylized Banking System.
Our news journalists report that additional information may be obtained by contacting A. Birch, University of London, Syst Risk Center,
Keywords for this news article include: London,
Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC
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