We analysed a systemic liquidity crisis by using a unique money market data-set in which the coded identity of the counterparties of each trade is known. Contrary to recent findings, we did not observe a positive relationship between interconnectivity and systemic risk. We have concluded that our conflicting findings can be related to the degree of market concentration on the borrowing side of the funding market. High level of concentration in the borrowing side led to lower interconnectivity but higher systemic risk prior to the crisis. We conclude that measures of market heterogeneity should be used to generalize the relationship between systemic risk and interconnectivity.

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doi.org/10.1080/14697688.2015.1043331, hdl.handle.net/1765/79251
Quantitative Finance

Saltoglu, B. (Burak), & Yenilmez, T. (Taylan). (2015). When does low interconnectivity cause systemic risk?. Quantitative Finance, 15(12), 1933–1942. doi:10.1080/14697688.2015.1043331