Preprint Article Version 1 This version is not peer-reviewed

An Agent-Based Approach to Interbank Market Lending Decisions and Risk Implications

Version 1 : Received: 1 April 2018 / Approved: 2 April 2018 / Online: 2 April 2018 (10:51:49 UTC)

A peer-reviewed article of this Preprint also exists.

Liu, A.; Mo, C.Y.J.; Paddrik, M.E.; Yang, S.Y. An Agent-Based Approach to Interbank Market Lending Decisions and Risk Implications. Information 2018, 9, 132. Liu, A.; Mo, C.Y.J.; Paddrik, M.E.; Yang, S.Y. An Agent-Based Approach to Interbank Market Lending Decisions and Risk Implications. Information 2018, 9, 132.

Journal reference: Information 2018, 9, 132
DOI: 10.3390/info9060132

Abstract

In this study, we examine the relationship of bank level lending and borrowing decisions and the risk preferences on the dynamics of the interbank lending We develop an agent-based model that incorporates individual bank decisions using the temporal difference reinforcement learning algorithm with empirical data of 6600 S. banks. The model can successfully replicate the key characteristics of interbank lending and borrowing relationships documented in the recent literatur A key finding of this study is that risk preferences at individual bank level can lead to unique interbank market structures which are suggestive of the capacity that the market responds to surprising

Subject Areas

interbank market; contagion risk; multi-agent system; reinforcement learning agents

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