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Matthew Jackson (Stanford University) – “What Makes Financial Networks Special? Distorted Investment Incentives, Regulation, and Systemic Risk Measurement”

October 7, 12:15 am - 1:30 pm

CREST Microeconomics Seminar : 

Time: 12:15 pm – 1:30pm
Date: 07th Oct. 2019
Place: Room 3001.

Matthew Jackson (Stanford University) – “What Makes Financial Networks Special? Distorted Investment Incentives, Regulation, and Systemic Risk Measurement” joint work with Agathe Pernoud

Abstract:

“In a model of financial networks with both debt and equity interdependencies, we show that financial organizations have incentives to: choose excessively risky portfolios; overly correlate their portfolios with those of their counterparties; and under-diversify in terms of choosing too few counterparties with whom to share risk. We also provide a measure of financial centrality in terms of how a given organization’s portfolio affects the values and defaults of other organizations. Additionally, we characterize optimal regulation in terms of the use of reserve requirements versus bailouts, and fully characterize the minimum bailouts needed to ensure systemic solvency.”

Organizers:

Roxana Fernandez Machado (CREST), Marie Laure Allain (CREST), and Linda Schilling (CREST)

Sponsors:
CREST

Lunch registration:
food provided, no registration needed

 

Details

Date:
October 7
Time:
12:15 am - 1:30 pm
Event Category:

Venue

3001