Paper proposes method to estimate network of exposures
Researcher draws on aggregate exposures and market data to build more complete picture of network of bank exposures
Drawing on both market data and information on aggregate exposures can help build a more accurate map of the network of bank exposures in a financial system, a staff working paper published by the Bank of Canada proposes.
Author José Fique outlines an approach that compares model-implied prices with observations of market prices: “I propose a valuation model that takes into account not only how common exposures affect the balance sheets of firms, but also the impact of the network of exposures
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