Liquidity Hoarding in Financial Networks: The Role of Structural Uncertainty

Figure 6

Probability distribution of number of failed banks in the LI1 scenario after a shock is applied to a small bank, a large bank, and multiple small banks. In comparison to the CI scenario, the probability of systemic breakdown increases after both single-bank-shock treatments, whereas it drops after multiple-bank shock. LI1 is a scenario in which a bank has access only to information from its direct neighbors at distance 1. LI = local information; CI = complete information.