Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93613
Authors: 
Duarte, Fernando
Eisenbach, Thomas M.
Year of Publication: 
2013
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 645
Abstract: 
We construct a new systemic risk measure that quantifies vulnerability to fire-sale spillovers using detailed regulatory balance sheet data for U.S. commercial banks and repo market data for broker-dealers. Even for moderate shocks in normal times, fire-sale externalities can be substantial. For commercial banks, a 1 percent exogenous shock to assets in 2013:Q1 produces fire-sale externalities equal to 21 percent of system capital. For broker-dealers, a 0.1 percent shock to assets in August 2013 generates spillover losses equivalent to almost 6 percent of system capital. Externalities during the last financial crisis are between two and three times larger. Our systemic risk measure reaches a peak in the fall of 2007 but shows a notable increase starting in 2004, ahead of many other systemic risk indicators. Although the largest banks and brokerdealers produce - and are victims of - most of the externalities, leverage and linkages of financial institutions also play important roles.
Subjects: 
systemic risk
fire-sale externalities
leverage
concentration
bank holding company
tri-party repo market
JEL: 
G01
G10
G18
G20
G21
G23
G28
G32
Document Type: 
Working Paper

Files in This Item:
File
Size
643.82 kB





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