Networks In Risk Spillovers
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Networks In Risk Spillovers
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Author : Monica Billio
language : en
Publisher:
Release Date : 2016
Networks In Risk Spillovers written by Monica Billio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We propose a spatial approach for modeling risk spillovers using financial time-varying proximity matrices based on observable networks. We show how these methods could be useful in (i) isolating risk channels, risk spreaders and risk receivers, (ii) investigating the role of portfolio composition in risk transfer, and (iii) computing target exposure structures able to reduce the forecasted system variance and thus the risk of the system. Our empirical analysis builds on banks' foreign exposures provided by the Bank of International Settlements (BIS) as a proxy for Euro area cross-country holdings. We find, in the European sovereign bond markets, that Germany, Italy and, to a lesser extent, Greece are playing a central role in spreading risk, and Ireland and Spain are the most susceptible receivers of spillover effects that can be traced back to a physical claim channel: banks' foreign exposures. We additionally show that acting on these physical channels before the sovereign crisis, it would have been possible to have a clear risk mitigation outcome.
Networks In Risk Spillovers
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Author : Monica Billio
language : en
Publisher:
Release Date : 2020
Networks In Risk Spillovers written by Monica Billio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Credit Risk Spillovers Systemic Importance And Vulnerability In Financial Networks
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Author :
language : en
Publisher:
Release Date : 2015
Credit Risk Spillovers Systemic Importance And Vulnerability In Financial Networks written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Credit Risk Spillovers Systemic Importance And Vulnerability In Financial Networks
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Author : Inna Grinis
language : en
Publisher:
Release Date : 2017
Credit Risk Spillovers Systemic Importance And Vulnerability In Financial Networks written by Inna Grinis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
How does the change in the creditworthiness of a financial institution or sovereign impact its creditors solvency? I address this question in the context of the recent European sovereign debt crisis. Considering the network of Eurozone member states, interlinked through investment cross-holdings, I model default as a multi-stage disease with each credit-rating corresponding to a new infection phase, then derive systemic importance and vulnerability indicators in the presence of financial contagion, triggered by the change in the creditworthiness of a network member. I further extend the model to analyse not only negative, but also positive credit risk spillovers.
Systemic Risk Spillovers In The European Banking And Sovereign Network
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Author :
language : en
Publisher:
Release Date : 2014
Systemic Risk Spillovers In The European Banking And Sovereign Network written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
We propose a framework for estimating network-driven time-varying systemic risk contributions that is applicable to a high-dimensional financial system. Tail risk dependencies and contributions are estimated based on a penalized two-stage fixed-effects quantile approach, which explicitly links bank interconnectedness to systemic risk contributions. The framework is applied to a system of 51 large European banks and 17 sovereigns through the period 2006 to 2013, utilizing both equity and CDS prices. We provide new evidence on how banking sector fragmentation and sovereign-bank linkages evolved over the European sovereign debt crisis and how it is reflected in network statistics and systemic risk measures. Illustrating the usefulness of the framework as a monitoring tool, we provide indication for the fragmentation of the European financial system having peaked and that recovery has started.
Assessing Systemic Risk Due To Fire Sales Spillover Through Maximum Entropy Network Reconstruction
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Author : Domenico Di Gangi
language : en
Publisher:
Release Date : 2018
Assessing Systemic Risk Due To Fire Sales Spillover Through Maximum Entropy Network Reconstruction written by Domenico Di Gangi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Monitoring and assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency. For this reason, systemic risk assessment with partial information is potentially very useful for regulators and other stakeholders. In this paper we consider systemic risk due to fire sales spillovers and portfolio rebalancing by using the risk metrics defined by Greenwood et al. (2015). By using a method based on the constrained minimization of the Cross Entropy, we show that it is possible to assess aggregated and single bank's systemicness and vulnerability, using only the information on the size of each bank and the capitalization of each investment asset. We also compare our approach with an alternative widespread application of the Maximum Entropy principle allowing to derive graph probability distributions and generating scenarios and we use it to propose a statistical test for a change in banks' vulnerability to systemic events.
Information Spillovers And Semicollaborative Networks In Insurer Fraud Detection
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Author : Nirup M. Menon
language : en
Publisher:
Release Date : 2017
Information Spillovers And Semicollaborative Networks In Insurer Fraud Detection written by Nirup M. Menon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
IT-related spillovers occur via data- and information-related transmission paths, so these types of spillovers are best studied through process-level measures. The medical claims fraud detection is a prototypical data- and information-intensive process in insurance companies. This paper examines the impact of IT-related spillovers on fraud detection outcome for insurers and patient-care quality for hospitals. I theorize three semicollaborative networks formed between state-level subsidiaries of insurers (regulation-bound network), between subsidiaries of an insurer parent company (sibling network), and between insurers and hospitals (risk-sharing), and hypothesize that these networks convey information spillovers. I then examine the impact of spillover benefits and the impact of spillover IT pools on future IT-related investments. The empirical analysis is conducted using 2011-2013 data for insurers and hospitals. I use a generalized linear model with a Tweedie distribution to correct for the finite mass of zeros for my dependent variable. Results reveal that the sibling network contributed the most of the spillover benefit, and the risk-sharing network did not contribute to fraud detection. I also find that the sibling network depresses future spending on fraud detection.
Financial Network Systemic Risk Contributions
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Author : Nikolaus Hautsch
language : en
Publisher:
Release Date : 2013
Financial Network Systemic Risk Contributions written by Nikolaus Hautsch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
We propose the realized systemic risk beta as a measure for financial companies' contribution to systemic risk given network interdependence between firms' tail risk exposures. Conditional on statistically pre-identified network spillover effects and market as well as balance sheet information, we define the realized systemic risk beta as the total time-varying marginal effect of a firm's Value-at-risk (VaR) on the system's VaR. Statistical inference reveals a multitude of relevant risk spillover channels and determines companies' systemic importance in the U.S. financial system. Our approach can be used to monitor companies' systemic importance allowing for a transparent macroprudential supervision.
Wide Volatility Spillover Networks
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Author : Yoel Furman
language : en
Publisher:
Release Date : 2014
Wide Volatility Spillover Networks written by Yoel Furman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
We introduce a conditional volatility model that combines persistent volatility dynamics with spillovers from a wide cross-section of assets. We use elastic net estimation on a large, restricted VAR of realized measures to model these volatility dynamics. We show that despite the many parameters resulting from this wide cross-section, this spillover autoregressive (SPAR) realized variance model forecasts accurately and can be used in estimating large volatility spillover networks. These volatility spillover networks can be visualized and used to explain Granger-causal contagion in a group of assets. We apply this model to identify systemic risk across U.S. financial institutions over the period 2001-2010, and show that our model identifies systemic risk buildup over the 2007-2008 financial crisis.
Volatility Spillover Along The Supply Chains
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Author : Theo Berger
language : en
Publisher:
Release Date : 2020
Volatility Spillover Along The Supply Chains written by Theo Berger and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
We introduce a financial network approach to quantify the impact of counterparty risk on firms' daily market risk, measured via conditional volatility. Translating conditional volatility into a value-at-risk (VaR) framework allows us to identify extreme losses beyond an estimated loss limit and to determine volatile market regimes. We find that suppliers are exposed to additional fundamental risks that are not captured by their market beta, and these get transferred along supply chains. The identified risk spillover affects both the coverage and the quality of suppliers' market risk assessments. If customers experience large losses beyond their individual VaR limit, suppliers' variance forecasts increase by (up to) 1%, and the probability of suppliers' extreme losses doubles the next day.