Transmission channels of systemic risk and contagion in the European financial network

  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={Journal of Banking and Finance},
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… 
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