Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126093
Authors: 
Betz, Frank
Hautsch, Nikolaus
Peltonen, Tuomas A.
Schienle, Melanie
Year of Publication: 
2016
Series/Report no.: 
Working Paper Series in Economics, Karlsruher Institut für Technologie (KIT) 79
Abstract: 
We propose a framework for estimating time-varying systemic risk contributions that is applicable to a high-dimensional and interconnected financial system. Tail risk dependencies and systemic risk contributions are estimated using a penalized two-stage fixed-effects quantile approach, which explicitly links time-varying interconnectedness to systemic risk contributions. For the purposes of surveillance and regulation of financial systems, network dependencies in extreme risks are more relevant than simple (mean) correlations. Thus, the framework provides a tool for supervisors, reflecting the market's view of tail dependences and systemic risk contributions. The model is applied to a system of 51 large European banks and 17 sovereigns during the period from 2006 through 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 they are reflected in estimated network statistics and systemic risk measures. Finally, our evidence provides an indication that the fragmentation of the European financial system has peaked.
Subjects: 
systemic risk contribution
tail dependence
network topology
sovereignbank linkages
Value-at-Risk
JEL: 
G01
G18
G32
G38
C21
C51
C63
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.