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SUMMARY:Vulnerable Banks - Landier\, A (Universit de Toulouse)
DTSTART:20140925T080000Z
DTEND:20140925T084500Z
UID:TALK54515@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:Based on joint work with David THESMAR (HEC) and Robin Greenwo
 od (NBER).\n\nWhen a bank experiences a negative shock to its equity\, one
  way to return to target leverage is to sell assets. If asset sales occur 
 at depressed prices\, then one bank's sales may impact other banks with co
 mmon exposures\, resulting in contagion. We propose a simple framework tha
 t accounts for how this effect adds up across the banking sector. Our fram
 ework explains how the distribution of bank leverage and risk exposures co
 ntributes to a form of systemic risk. We compute bank exposures to system-
 wide deleveraging\, as well as the spillover of a single bank's deleveragi
 ng onto other banks. We show how our model can be used to evaluate a varie
 ty of crisis interventions\, such as mergers of good and bad banks and equ
 ity injections. We apply the framework to European banks vulnerable to sov
 ereign risk in 2010 and 2011.\n
LOCATION:Seminar Room 1\, Newton Institute
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