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Cambridge Finance Workshop - Matthew Elliott

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When Oct 26, 2017
from 01:00 PM to 02:00 PM
Where Room W4.03, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
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Matthew Elliott, University Lecturer, Faculty of Economics, University of Cambridge.

Firebreaks and Risk-Shifting in Financial Networks
Matthew Elliott and Jonathon Hazell
May 2017, first draft September 2015
Financial connections hedge risks, but also propagate large shocks. We characterise socially optimal financial networks in the presence of this tradeoff. These networks divide banks into groups, with strong connections within groups but weak connections between groups. The weak connections
create firebreaks, which limit the spread of contagion. When financial distress costs are below a certain threshold, socially efficient networks cannot form in equilibrium. Shareholders engage in risk-shifting by altering financial connections—thereby increasing equity value, but also raising the likelihood of contagion. Equally, socially efficient networks are an equilibrium when financial distress costs are above this threshold. Contagion becomes so costly that banks are not willing to take the other side of a risk-shifting trade.

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Best Student Paper Award 2018 - registration is now closed

Feb 02, 2018

For the last ten years, Cambridge Finance is offering its Best Student Paper Award. The award comprises a cash honorarium of £1,000 and a certificate is awarded to the author of the best student paper in finance presented during the 2017-2018 academic year.

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