  The scope of financial systemic risk research encompasses a wide range of
interbank channels and effects, including asset correlation shocks, default
contagion, illiquidity contagion, and asset fire sales. This paper introduces a
financial network model that combines the default and liquidity stress
mechanisms into a "double cascade mapping". The progress and eventual result of
the crisis is obtained by iterating this mapping to its fixed point. Unlike
simpler models, this model can therefore quantify how illiquidity or default of
one bank influences the overall level of liquidity stress and default in the
system. Large-network asymptotic cascade mapping formulas are derived that can
be used for efficient network computations of the double cascade. Numerical
experiments then demonstrate that these asymptotic formulas agree qualitatively
with Monte Carlo results for large finite networks, and quantitatively except
when the initial system is placed in an exceptional "knife-edge" configuration.
The experiments clearly support the main conclusion that when banks respond to
liquidity stress by hoarding liquidity, then in the absence of asset fire
sales, the level of defaults in a financial network is negatively related to
the strength of bank liquidity hoarding and the eventual level of stress in the
network.
