Thank you :) Sounds like a hell of an optimization problem, since there are not only many variables to model, but also many ((risk) allocation) decisions to make!
When a bank considers giving a loan, can it model where the money would/might be eventually transferred to - whether it would stay on the bank's books and thus require less liquidity to cover net outflows?
I have the impression that central banks try to model national economies via "flows between large groups of actors", do commercial banks analyze/simulate this too on a (smaller) scale, to find out how not only money flows between them and other banks, but within itself too? Since accurate models would result in more profitability, is it safe to assume that banks have the best economic "world model"?
When I buy groceries, I have no idea where the money ends up even in the next "step", maybe banks attempt full "network simulations"?
When a bank considers giving a loan, can it model where the money would/might be eventually transferred to - whether it would stay on the bank's books and thus require less liquidity to cover net outflows?
I have the impression that central banks try to model national economies via "flows between large groups of actors", do commercial banks analyze/simulate this too on a (smaller) scale, to find out how not only money flows between them and other banks, but within itself too? Since accurate models would result in more profitability, is it safe to assume that banks have the best economic "world model"?
When I buy groceries, I have no idea where the money ends up even in the next "step", maybe banks attempt full "network simulations"?
Regarding the cooperation/net flows, wouldn't a more "symmetric" banking system be able to create more credit? https://github.com/void4/notes/issues/73