The webinars will take place on Zoom and a link to the virtual room will be sent out to all those who registered at the registration page.
Speaker: Nils Detering (UC Santa Barbara)
Title: When do you Stop Supporting your Bankrupt Subsidiary
Abstract: We consider a network of bank holdings, where every holding has two subsidiaries of different type. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiary up to a certain level when they would otherwise fail to honor their financial obligations. We investigate the spread of contagion in this banking network when the number of bank holdings is large, and find the final number of defaulted subsidiaries under different rules for the holding support. We also consider resilience of this multilayered network to small shocks. Our work sheds light onto the role that holding structures can play in the amplification of financial stress.
We find that depending on the capitalisation of the network, a holding structure can be beneficial as compared to smaller separated entities. In other instances it can be harmful and actually increase contagion.
We illustrate our results in a numerical case study and also determine the optimal level of holding support from a regulator perspective.
Working paper: https://arxiv.org/abs/2201.12731
This series of webinars addresses all interested people in probability, stochastic analysis, control, risk evaluation, statistics, with a view towards applications, in particular to renewable energy markets and production. This series brings together the major research themes of the projects STORM, SCROLLER, and SPATUS.