Contagion risk in the Australian banking and property sectors
AbstractThe Australian banking system emerged from the global crisis virtually unhurt, with most banks still profitable, adequately capitalized, and with AA credit ratings. Are there any risks or vulnerabilities in this success story? This paper analyzes Australia's systemic banking risk and attempts to determine if this risk increased with the recent global crisis and whether this risk is related to the downturn experienced in the real estate market. We use extreme value theory to measure banks' and property firms' univariate Value at Risk, as well as multivariate intra-sector and inter-sector contagion risks. Of the 13 sectors analyzed, we find that the property sector exhibits the highest level of extremal dependence with the banking sector. The credit crisis significantly increased the probability of a bank or property firm crashing. Moreover, contagion risks significantly increased not only within the banking and property sectors, but also between those sectors.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 35 (2011)
Issue (Month): 3 (March)
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Contagion risk Banks Extreme value theory Australia;
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