Li-Hsien Sun

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We propose a simple model of inter-bank borrowing and lending where the evolution of the logmonetary reserves of N banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the system depends on the rate of inter-bank borrowing and lending. Systemic risk is characterized by a large number of banks(More)
We study the behavior of diffusions coupled through their drifts in a way that each component mean-reverts to the mean of the ensemble. In particular, we are interested in the number of components reaching a “default” level in a given time. This coupling creates stability of the system in the sense that there is a large probability of “nearly no default” as(More)
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