Liquidity Hoarding in Financial Networks: The Role of Structural Uncertainty

Figure 14

A comparison of probability distributions of number of failed banks after a large-bank shock in the LI1 scenario, and scenario in which confidence from the LI1 scenario was exogenously applied to the CI scenario. The probability of systemic breakdown is nearly the same in both scenarios. CI is a scenario in which a bank has access to information from all other banks in the network. LI1 is a scenario in which a bank has access only to information from its direct neighbors at distance 1.