Stess-testing the system: Financial shock contagion in the realm of uncertainty

Autor:	Gurciullo, Stefano
Rok vydání:	2014
Předmět:	Quantitative Finance - Risk Management Computer Science - Social and Information Networks Physics - Physics and Society Quantitative Finance - General Finance 91B82 91B74 91G99
Druh dokumentu:	Working Paper
Popis:	This work proposes an augmented variant of DebtRank with uncertainty intervals as a method to investigate and assess systemic risk in financial networks, in a context of incomplete data. The algorithm is tested against a default contagion algorithm on three ensembles of networks with increasing density, estimated from real-world banking data related to the largest 227 EU15 financial institutions indexed in a stock market. Results suggest that DebtRank is capable of capturing increasing rates of systemic risk in a more sensitive and continuous way, thereby acting as an early-warning signal. The paper proposes three policy instruments based on this approach: the monitoring of systemic risk over time by applying the augmented DebtRank on time snapshots of interbank networks, a stress-testing framework able to test the systemic importance of financial institutions on different shock scenarios, and the evaluation of distribution of systemic losses in currency value. Comment: 50 pages, Paper presented as part of the coursework for the PhD Transfer Viva
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/1412.1679 Zobrazit plný text záznamu View this record from Arxiv