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- Title
Liquidity risk and contagion.
- Authors
Cifuentes, Rodrigo; Ferrucci, Gianluigi; Hyun Song Shin
- Abstract
This article discusses liquidity risk and contagion in Great Britain. In this article, the authors combine liquidity risk with externally imposed regulatory solvency requirements, when mark-to-market accounting rules of firms' assets are in place. The model incorporates two channels of contagion direct balance sheet interconnections among financial institutions and contagion via changes in asset prices. Changes in asset prices may interact with externally imposed solvency requirements or the internal risk controls of financial institutions to generate amplified endogenous responses that are disproportionately large relative to any initial shock.
- Subjects
UNITED Kingdom; LIQUIDITY (Economics); FINANCE; LIABILITIES (Accounting); ACCOUNTS receivable; BANKING industry; FINANCIAL institutions; LENDER liability
- Publication
Bank of England Quarterly Bulletin, 2005, Vol 45, Issue 2, p188
- ISSN
0005-5166
- Publication type
Article