Banking Systems Simulation: Theory, Practice, And Application Of Modeling Shocks, Losses, And Contagion

Written by a highly-qualified author team with a global financial perspective, this book presents a unique reference to banking systems risk modeling with a focus on the analysis and systemic risk within these systems. This book is original as it combines banking simulation and modeling to represent and measure banking risk problems for an entire system. These methods are crucial when assessing the potential risks that may contribute to a financial crisis, and they are also important to use when it is not possible to base all analyses on actual data, as the available data are limited by cases number, supervisors' early intervention, and the framework evolution. The authors approach these methods logically by providing the building blocks of modeling and simulation before including information on the individual techniques that make up a systems model. The authors also provide clear and detailed explanations to the mathematical and legal concepts used to analyze banking risk problems and measure techniques for representing the main banking risk sources. There are numerous software descriptions throughout with references and tools used to help readers gain a better understanding of the presented techniques. The book concludes with an appendix that features real-world datasets and models. Topical coverage includes: banking risk modeling; counterparty risk; market risk; organizational risk; stress testing; contagion; system modeling; simulation models; Monte Carlo Simulation; single default modeling: single and multiple default approach; real economy, sovereign risk and banking systems linkages; deposits guarantee schemes and resolution funds dimensioning; banking systems regulation tests; risk contributions and systemically important financial institutions; regulation; Basel I, II, and III; the Dodd-Frank Act, the Vickers Report, and the Liikanen report; and European Union directives.

Stefano Zedda is Researcher in Financial Mathematics at the University of Cagliari in Italy and qualified as associate professor in banking and corporate finance. His research is mainly focused on quantitative analyses for banking and finance, in particular banking systems modeling and simulation. ??In 2008, he started and developed the mathematical modeling and software implementation of the Systemic Model for Banking Originated Losses (SYMBOL), further developed during his activity at the European Commission, which subsequently adopted it as a standard tool for testing banking regulation proposals. Stefano Zedda’s research interests include banking, financial mathematics, and statistics, specifically simulation of banking and financial systems stability, banking regulation impact assessment, and interactive agents’ simulation.