April - 2020
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Edina Berlinger

is an associate professor at Corvinus University of Budapest and she is also the Head of Department of Finance. Her expertise covers asset pricing and risk management and especially the financial management of student loan systems. She has participated in several research and consultancy projects including design and implementation of student loan schemes as World Bank consultant and a research fellowship at the Collegium Budapest in complex systems. She received her PhD in Economics (2004) from Corvinus University.

Zsolt Bihary

is an associate professor of the Department of Finance at Corvinus University of Budapest (CUB). Prior to his recent position he worked as a researcher in physical chemistry, and as a financial modeler at Morgan Stanley. His research interest focuses on portfolio optimization, evolutionary finance, and financial networks.

Tamas Vadasz

is a final year Finance PhD candidate at Warwick Business School, his main research field is banking theory. His current works are related to financial stability and regulation in the banking sector, systemic risk using network analytics, and policy issues regarding market structure and competition in retail banking. Tamas has received his MSc in Finance from Corvinus University of Budapest, prior to returning to the academia he worked as a consultant in the EMEA banking sector.

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Edina Berlinger, Zsolt Bihary, Tamás Vadász: The emergence of core-periphery structures from bilateral partner limits

In this paper, we characterize optimal interbank networks when lending is subject to bilateral partner limits. For an arbitrary partner limit structure, we show that when random liquidity shocks tend to be small, optimal trading networks exhibit homogeneity, while heterogeneity appears gradually as the noise of liquidity shocks increases. In the limit, optimal trading networks converge to the half of the partner limit network. We characterize this convergence using a plausible limitformation algorithm with numerical simulations. Our result can give a new insight into robust empirical results on the emergence of core-periphery interbank network structures.

Last modified: 2018.11.30.