The Research On Interbank Market Risk Contagion Based On Complex Network

As the most important participants of the modern financial system, banks play a crucial role in the financial ecosystem of a greater range. When the financial crisis kicks door in 2008, the issue of risk management under discussion changes from banks as an individual company to the whole financial system. As the crisis outbreak across the broad, words of the increase of the system risk comes from " too huge to fall " to " too dense to fall". This topic even has been put forward academically and politically when the Lehman Brothers bankrupted in September,2008 and the American government afterwards lent a hand to AIG. With the complex relationship among the banks, the risk in them tends to spread like a virus. Once the amount of the risk comes to some extent, the damage will be systematic, causing a big financial crisis.This paper use the methods based on a complicated network, which defines bands as the nodes of the net and the interbank payments as the lines between the nodes, contributing a scale free networks of the interbank markets with vectors. There are two different kinds of nodes in this network. The first one is the hub nodes, also called the major nodes, while the second the follow-ups nodes which were added by preference, called by the minor nodes. This paper simulate the financial market in china with 4 hub nodes representing the four national banks of china(ICBC, CCB, ABC, BC), creating a topological structure combined a hundred nodes. By simulating the data, we can get the balance sheet of each bank. And then we can also simulate a impact on the system. We study different impacts on the simulating interbank markets by calculating how many banks bankrupt. The study shows, the bankruptcy of one single bank even it is the hub node bank, will not cause the bankruptcy of the other banks, but decrease the net worth of others. However, the intense bankruptcy of several hub banks will have a much bigger impact on the whole. In the study of several banks collapse at the same time, The study shows, the bankruptcy of major banks brings more damage to the system than minor ones, however, minor banks can also shake the earth when there is quite some of them. Therefore, regulators should pay attention to low in-degree banks to prevent the systemic risk.