CEU Electronic Theses and Dissertations, 2015
| Author | Dóczy, Balázs Károly |
|---|---|
| Title | Systemic Risk and Contagion in the Hungarian Interbank Market |
| Summary | Assessing systemic risk in interbank markets became increasingly important after 2008 for banks and regulators alike, as domino effects are one of the main forces propagating illiquidity crises in banking systems. Research on contagion shows that network structure is an important factor in determining systemic risk. This paper analyzes systemic risk in the Hungarian banking system between 2003 and 2011, and contagion effects in modified versions of the Hungarian interbank network. I use a complete dataset of uncollateralized interbank transactions provided by the Hungarian National Bank to construct interbank networks for each year. Simulating domino effects in the created networks, I find that the Hungarian interbank market is highly resilient, with no contagious scenarios and no substantial capital losses throughout the 9 years. Trial simulations are provided as an exercise to evaluate contagion in different network structures. Results show that there is no systematic difference between the importance of a major lender and a major borrower in propagating contagion. Another lesson from the exercises is that increasing interconnectedness changes the amount of contagion in the network. These changes, however are not systematic, and capital losses do not change significantly compared to the less interconnected network. |
| Supervisor | Peter Kondor |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2015/doczy_balazs.pdf |
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