Seungmo Ku, Changju Lee, Minhyuk Lee, Woojin Chang
During the financial crisis, the collapse of financial institution raise the attention of studying interbank network to manage financial risk. However, analyzing the interbank network is limited due to the unavailability of bank-by–bank bilateral exposures. In this research, we build on agent based model of interbank market which lending contracts are dynamically adjusted through simulations. We perform stress test to analyze the topology of the interbank network with various scenarios. Types of scenarios we use are focused on the shock to a single agent, to specific sector, and to whole market. First, we find that the shape of interbank topology on each scenario is significantly different. Second, we compare the result of each scenario to find stylized facts. Using these results, we build an efficient strategy to manage financial risk in interbank markets.