Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263954 
Year of Publication: 
2022
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2022-034/VI
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We propose a credit portfolio approach for evaluating systemic risk and attributing it across institutions. We construct a model that can be estimated from high-frequency CDS data. This captures risks from privately held institutions and cooperative banks, extending approaches that rely on information from the public equity market. We account for correlated losses between the institutions, overcoming a modeling weakness in earlier studies. A latent risk factor with heterogeneous exposures fitted on the implied default probabilities quantifies the potential for joint distress and losses. We apply the model to a universe of Dutch banks and insurers.
Subjects: 
Systemic risk
CDS rates
implied market measures
financial institutions
JEL: 
G01
G20
G18
G38
Document Type: 
Working Paper

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