Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257842 
Year of Publication: 
2019
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 7 [Issue:] 1 [Article No.:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-25
Publisher: 
MDPI, Basel
Abstract: 
We propose a statistical measure, based on correlation networks, to evaluate the systemic risk that could arise from the resolution of a failing or likely-to-fail financial institution, under three alternative scenarios: liquidation, private recapitalization, or bail-in. The measure enhances the observed CDS spreads with a risk premium that derives from contagion effects across financial institutions. The empirical findings reveal that the recapitalization of a distressed bank performed by the other banks in the system and the bail-in resolution minimize the potential losses for the banking sector with respect to the liquidation scenario, thus posing limited systemic risks. A closer comparison between the private intervention recapitalization and the bail-in tool shows that the latter slightly reduces contagion effects with respect to the private intervention scenario.
Subjects: 
bail-in
bank resolution
Corporate Default Swap (CDS) spreads
financial networks
systemic risk
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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