Early warning of systemic risk in global banking: eigen-pair R number for financial contagion and market price-based methods
| Autor: | Simone Giansante, Sheri M Markose, Nicolas A. Eterovic, Mateusz Gatkowski |
|---|---|
| Přispěvatelé: | Markose S., Giansante S., Eterovic N.A., Gatkowski M. |
| Rok vydání: | 2021 |
| Předmět: |
050208 finance
Financial contagion Paradoxical risk measures 05 social sciences Global financial networks General Decision Sciences Management Science and Operations Research Tipping point (climatology) Statistical market price-based risk measures Eigen-pair analysis Capital (economics) 0502 economics and business Systemic risk Market price Capital requirement Economics Econometrics Balance sheet Early warning signals Asset (economics) 050207 economics OR in banking |
| Zdroj: | Annals of Operations Research. |
| ISSN: | 1572-9338 0254-5330 |
| DOI: | 10.1007/s10479-021-04120-1 |
| Popis: | We analyse systemic risk in the core global banking system using a new network-based spectral eigen-pair method, which treats network failure as a dynamical system stability problem. This is compared with market price-based Systemic Risk Indexes (SRIs), viz. Marginal Expected Shortfall (MES), Delta Conditional Value-at-Risk (Delta-CoVaR), and Conditional Capital Shortfall Measure of Systemic Risk (SRISK) in a cross-border setting. Unlike paradoxical market price based risk measures, which underestimate risk during periods of asset price booms, the eigen-pair method based on bilateral balance sheet data gives early-warning of instability in terms of the tipping point that is analogous to the R number in epidemic models. For this regulatory capital thresholds are used. Furthermore, network centrality measures identify systemically important and vulnerable banking systems. Market price-based SRIs are contemporaneous with the crisis and they are found to covary with risk measures like VaR and betas. |
| Databáze: | OpenAIRE |
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