Finance Seminar - Lin Shen (INSEAD)
12 October 2022, 4:00 pm–5:15 pm
Lin Shen (INSEAD) will present "Synchronicity and Fragility" at this Finance Seminar (joint with the School of Management).
Abstract: We show that the correlation across financial institutions is a major force that increases their overall fragility. Our model features a financial system with banks individually prone to runs and interconnected through fire sales. Strategic complementarities within and across banks amplify each other, and this causes the correlation in their risks to be a key factor driving the fragility of each bank and the system as a whole. Reducing asset commonality and improving bank-specific disclosure alleviate fragility through desynchronizing runs across banks. Secondary market liquidity injections have a significant stabilizing effect through synchronicity reduction on top of their direct effect.
You can sign up for an appointment with the speaker on the wiki page or via email: https://wiki.ucl.ac.uk/pages/viewpage.action?pageId=225052954 The paper is available for download on the wiki page.
Both the seminar and meetings will be in hybrid format.
Zoom Meeting ID: 736 487 3755