Jump to ContentJump to Main Navigation
Connectedness and ContagionProtecting the Financial System from Panics$
Users without a subscription are not able to see the full content.

Hal S. Scott

Print publication date: 2016

Print ISBN-13: 9780262034371

Published to MIT Press Scholarship Online: January 2017

DOI: 10.7551/mitpress/9780262034371.001.0001

Show Summary Details
Page of

PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use (for details see www.mitpress.universitypressscholarship.com/page/privacy-policy).date: 19 October 2018

The Concept of Connectedness

The Concept of Connectedness

Chapter:
(p.3) 1 The Concept of Connectedness
Source:
Connectedness and Contagion
Author(s):

Hal S. Scott

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262034371.003.0001

This chapter discusses the first of the three components of systemic risk: connectedness. Asset connectedness is the concern that the failure of one financial institution will provoke a chain reaction of failures by other financial institutions with direct credit exposures to the failed institutions. Liability connectedness refers to the connection between the providers and recipients of short-term funding, whereby if a funding institution fails, the failure of its dependent recipient institutions will also result. Neither asset connectedness nor liability connectedness defaults were a problem during the 2008 financial crisis. The losses imposed on firms by Lehman Brothers were not large enough to push them into bankruptcy. Moreover, liability connectedness defaults were not a problem during the crisis, as Lehman, nor other financial institutions, were an important source of short-term funding for other financial institutions.

Keywords:   asset connectedness, liability connectedness, financial institution, credit exposure, short-term funding, defaults, financial crisis, systemic risk

MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.