,
Systemic Valuation of Banks—Interbank Equilibrium and Contagion
(2011)
Аннотация
The aim of the chapter is to propose the new approach to valuation of
individual banks which takes into account the risk of the whole interbank market
network. We show that the value of the bank is equal to the value of the call option
on the bank's debt which is the standard step in the valuation theory. However,
the underlying value process depends on the possible interbank payments the bank
expects to receive from other participants of the interbank market. In this way valuation
theory originated to 4 is embedded into the systemic framework a la 6
and we are able to prove that the value of a bank should not only depend on its
internal financial standing but on the ability of their interbank counterparties to repay
their debts. Our model has two unique features. Firstly, we demonstrate how
losses originated to the interbank exposures can be reflected into the valuations of
the banks even if it is extremely difficult to estimate the default probabilities of the
interbank deposits. Secondly, liquidity of the bank and marketability of the bank's
counterbalancing capacity is an outcome of the interbank market equilibrium. We
apply the developed theory to study the relationship between the US banking system
structure and the valuations of the US banks. We solely use publicly available data:
the financial statements of the US banks provided by FDIC and the stock exchange
quotes.
