I finished my PhD on "Systemic Risk in Interbank Markets" at the Friedrich-Schiller-Universität Jena within the Graduate School Foundations of Global Financial Markets - Stability and Change in September 2011.
Currently, I am a postdoctoral researcher at the Interdisciplinary Group of Complex Systems Research at the University Carlos III Madrid and a Collaborating Research Scholar within the networks cluster of Keble College at Oxford University.
Research:
Publications:
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"Note on interlinkages in the South African interbank system" (with Nicola Brink), Special Note in the Financial Stability Review, South African Reserve Bank (March 2011). [Abstract] [FSR]
This paper analyses the network structure of the South African overnight interbank market by employing measures from network theory. A unique data set of interbank transactions from the South African Multiple Options Settlement (SAMOS) system is used. It is shown that the South African interbank system has been largely stable and resilient over the period from March 2005 to June 2010, even in times of great distress on the international financial markets. The number of banks participating in the interbank market was approximately constant over the analysed period, as well as the high level of interconnectedness. A low average path length and high clustering coefficient indicate a high level of liquidity allocation and risk sharing in the system. Furthermore a Network Systemic Importance Index (NSII) is developed to assess the systemic importance of individual banks in South Africa. This index measures each banks size, interconnectedness and substitutability by employing network theory. It is a relative index in the sense that the systemic importance of any given bank does not only depend on the properties of the bank itself, but rather on the properties of the whole network. This approach is therefore less prone to moral hazard and can be used as a tool for macroprudential oversight in addition to microprudential supervision. The NSII addresses the cross-sectional dimension of systemic risk. It has to be stressed, however, that it gives no indication of the default probability of individual banks and has therefore be accompanied by other macroprudential tools for a full picture of systemic risk.
Papers Under Revision:
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"The Effect of Interbank Network Structure on Contagion and Common Shocks", Deutsche Bundesbank Discussion Paper Series 2, 12/2011, (2011). [Abstract] [Paper]
This paper proposes a dynamic multi-agent model of a banking system with central bank. Banks optimize a portfolio of risky investments and riskless excess reserves according to their risk, return, and liquidity preferences. They are linked via interbank loans and face stochastic deposit supply. Evidence is provided that the central bank stabilizes interbank markets in the short-run only. Comparing different interbank network structures, it is shown that money-center networks are more stable than random networks. Systemic risk via contagion is compared to common shocks and it is shown that both forms of systemic risk require different optimal policy responses.
Recent Working Papers:
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"Basel III and Systemic Risk Regulation - What Way Forward?", Global Financial Markets Working Paper Series 17-2011, (2011). [Abstract] [Paper]
One of the most pressing questions in the aftermath of the financial crisis is how to deal with systemically important financial institutions
(SIFIs). The purpose of this paper is to review the recent literature on systemic risk and evaluate the regulation proposals in the Basel III framework with respect to this literature. A number of shortcomings in the current framework are analyzed and three measures for future reform are proposed: counter-cyclical risk-weights, dynamic asset value correlation multipliers, and enhanced transparency requirements for SIFIs.
Work in progress:
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"Financial Linkages, Transparency, and Systemic Risk" (with Toni Ahnert, London School of Economics and Political Science and Financial Markets Group). [Abstract]
A fundamental structural change of the financial system in the previous decade resulted in increased interconnectedness and opacity. We develop a model of an interconnected financial system and examine its consequences for systemic risk and macro-prudential transparency regulation. Our model features fire sales and contagious counterparty risk arising from interbank loans. We also describe a novel and stabilising effect arising from a joint liquidation market, characterising the conditions under which this effect reduces systemic risk. We demonstrate that enhanced transparency can increase systemic risk. Examining the relationship between financial linkages and opacity conducive to low systemic risk, we contribute to the debate on transparency within the Basel framework of banking supervision.
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"The Dynamics of Interbank Markets". (My Lamfalussy project). You can find the proposal here.
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"Macroprudential Policy and Systemic Risk" (with Silvia Gabrieli, Banque de France).
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"Savings, Institutions and the Debt Cycle" (with Andreas Freytag and Sebastian Voll, Friedrich-Schiller-Universität Jena).
[Abstract]
This paper analyzes the sustainability of current account deficits and develops a model for the dynamics of the balance of payments. We empirically establish that institutions have an impact of private savings. This impact is modelled by making a households' time preference rate dependent on a microeconomic measure capturing the institutional environment the household faces. We then extend the classical debt cycle model by incorporating the institutional dependent time preference rate and show that good institutions can enable a country to enter a beneficial debt cycle.
Teaching:
- Summer 2011
Banking and Modern Financial Economics (University of Pretoria), 13.+14. September 2011. The course outline can be found here. The literature for the course can be found here. Some introductory material for statistics can be found in the book by Grinstead and Snell.
- Winter 2008/2009
Business Cycle Theory and Policy (seminar with Prof. H.W. Lorenz), Jan. 2009, Carl-Zeiss-Strasse 3, SR 4.157
- Summer 2008
Macroeconomics (teaching assistant)
E-mail: cogeorg@gmail.com | pierre.georg@uc3m.es
Telephone:+34 916245960 | Skype: co.georg
Postal Address: Universidad Carlos III de Madrid, Avenida de la Universidad, 30, 28911 Leganes, Madrid, Spain