Diamond–Dybvig model

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The Diamond–Dybvig model is an influential model of bank runs and related financial crises. The model shows how banks' mix of illiquid assets (such as business or mortgage loans) and liquid liabilities (deposits which may be withdrawn at any time) may give rise to self-fulfilling panics among depositors.

Excerpt from the Wikipedia article “Diamond–Dybvig model”, under the CC BY-SA 4.0 license. Read the article on Wikipedia

Image: Dominic Alves from Brighton, England, CC BY 2.0, via Wikimedia Commons.