Transmission Channels of Systemic Risk and Contagion in the European Financial Network

@article{Paltalidis2015TransmissionCO,
  title={Transmission Channels of Systemic Risk and Contagion in the European Financial Network},
  author={Nikos Paltalidis and Dimitrios Gounopoulos and Renatas Kizys and Yiannis Koutelidakis},
  journal={ERN: Banking \& Monetary Policy (Topic)},
  year={2015}
}
We investigate systemic risk and how financial contagion propagates within the euro area banking system by employing the Maximum Entropy method. The study captures multiple snapshots of a dynamic financial network and uses counterfactual simulations to propagate shocks emerging from three sources of systemic risk: interbank, asset price, and sovereign credit risk markets. As conditions deteriorate, these channels trigger severe direct and indirect losses and cascades of defaults, whilst the… 

Systemic risk and dynamics of contagion: a duplex inter-bank network

This paper constructs a duplex banking network formed by credit relationships and information interaction via the banks’ balance sheet to model the structure of systemic risk and investigate the

Risk contagion in the cross‐border banking network: Some new evidence

This paper applies consolidated banking statistics data from the Bank for International Settlement to simulate risk contagion in a cross‐border banking system with shocks of credit and liquidity.

Measuring Bank Systemic Risk in China: A Network Model Analysis

Correlation networks and risk spillovers within financial institutions contribute to the generation and dissemination of systemic risk. In this paper, a risk correlation network is constructed among

Macroeconomics of Systemic Risk: Transmission Channels and Technical Integration

The avenue to find a balanced assessment of systemic financial institutions needs the integration of macro and micro granular datasets. This paper investigates how macroeconomic shocks affect

Assessing the risk of default propagation in interconnected sectoral financial networks

This work introduces a computational model, inspired by the probabilities of default contagion, that allow for the main statistics of default diffusion given the network structure at individual and system levels, and shows the exposure of different sectors to default cascades.

Are Banks Still a Risk Source for Stock Market? Some Empirical Evidences

The global financial crisis of 2008 proved that what initially appeared to be relatively small losses in the financial system can be magnified to systemic ones. The European Union debt crisis has

Assessing the interconnectedness and systemic risk contagion in the Chinese banking network

PurposeIn this paper, the authors use the balance sheet data to investigate the interconnectedness and risk contagion effects in China's banking sector. They firstly study the network structure and

Asymmetric Risk Spillover Networks and Risk Contagion Driver in Chinese Financial Markets: The Perspective of Economic Policy Uncertainty

This paper construct asymmetric risk spillover networks of Chinese financial markets based on five sectors: bank, securities, insurance, diversified finance, and real estate, and finds that the bank sector is systemically important and plays an important role in the path of financial risk contagion.

Financial Contagion and Shock Transmission During the Global Financial Crisis

After the recent financial crisis, the analysis of shock transmission across the financial system has received a great deal of attention. In particular, the role of financial contagion as a shock

Measuring the systemic risk in indirect financial networks

ABSTRACT In this study, we present a novel measurement approach for systemic risk by considering an indirect network structure. In a departure from previous studies, this measurement method captures
...

References

SHOWING 1-10 OF 86 REFERENCES

Estimating Bilateral Exposures in the German Interbank Market: Is There a Danger of Contagion?

It is found that the financial safety net considerably reduces – but does not eliminate – the danger of contagion, and the failure of a single bank could lead to the breakdown of up to 15 % of the banking system in terms of assets.

Macro-Networks: An Application to the Euro Area Financial Accounts

Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe

The global financial crisis rapidly spread across borders and financial markets, and also distressed EU bond markets. The crisis did not hit all markets in the same way. We measure the strength and

Systemic Risk and Stability in Financial Networks

This paper argues that the extent of financial contagion exhibits a form of phase transition: as long as the magnitude of negative shocks affecting financial institutions are sufficiently small, a

The Effect of the Interbank Network Structure on Contagion and Common Shocks

FINANCIAL CONTAGION THROUGH CAPITAL CONNECTIONS: A MODEL OF THE ORIGIN AND SPREAD OF BANK PANICS

Financial contagion is modeled as an equilibrium phenomenon in a dynamic setting with incomplete information and multiple banks. The equilibrium probability of bank failure is uniquely determined. We

Assessing interbank contagion using simulated networks

A new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures is presented and a simplified measure—a so-called Systemic Probability Index—that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations is proposed.

Estimating Systemic Risk in the International Financial System

Using a unique and comprehensive dataset, this paper develops and uses three distinct methods to quantify the risk of a systemic failure in the global banking system. We examine a sample of 334 banks

Systemic risk, interbank relations and liquidity provision by the Central Bank

We model systemic risk in an interbank market. Banks face liquidity needs as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks
...