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Measuring Systemic Risk using Contingent Claims Analysis (CCA)

Author

Listed:
  • Moisa Altar

    (The Bucharest University of Economic Studies, The Romanian – American University – FINSYS)

  • Adam-Nelu Altar-Samuel

    (The Romanian – American University - Mathematics, Statistics and Computer Science Department)

  • Ioana Marcu

    (The Romanian – American University - FINSYS)

Abstract

This paper dwells upon the contingent claims analysis (CCA) framework in order to quantify the risk of financial distress at the level of the sectors of economy (banking, sovereign and corporate sector). After the CCA risk indicators have been obtained for the three analyzed sectors, a global VAR is constructed for the analysis of spillover effects among the Central and Eastern European countries by determining whether a shock in one sector of a country would have a significant effect on the other analyzed sectors and countries and, especially, on the contraction of economic growth. In order to analyze the impact and spillover of shocks across sectors and countries, adverse shock scenarios are developed, particularly regarding the banking and sovereign risk. The methodology is applied on four Central and Eastern European Countries: Romania, Bulgaria, Hungary and Poland.

Suggested Citation

  • Moisa Altar & Adam-Nelu Altar-Samuel & Ioana Marcu, 2014. "Measuring Systemic Risk using Contingent Claims Analysis (CCA)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 22-48, December.
    • Handle: RePEc:rjr:romjef:v::y:2014:i:4:p:22-48
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    References listed on IDEAS

    as
    1. Mr. Dale F Gray & Mr. James P Walsh, 2008. "Factor Model for Stress-testing with a Contingent Claims Model of the Chilean Banking System," IMF Working Papers 2008/089, International Monetary Fund.
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    3. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
    4. Charles Goodhart & Miguel Segoviano, 2009. "Banking Stability Measures," FMG Discussion Papers dp627, Financial Markets Group.
    5. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    6. Andreas Jobst & Mr. Dale F Gray, 2013. "Systemic Contingent Claims Analysis: Estimating Market-Implied Systemic Risk," IMF Working Papers 2013/054, International Monetary Fund.
    7. Dimitrios Bisias & Mark Flood & Andrew W. Lo & Stavros Valavanis, 2012. "A Survey of Systemic Risk Analytics," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 255-296, October.
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    10. Mr. Nicolas R Blancher & Ms. Srobona Mitra & Mrs. Hanan Morsy & Mr. Akira Otani & Tiago Severo & Ms. Laura Valderrama, 2013. "Systemic Risk Monitoring ("SysMo") Toolkit—A User Guide," IMF Working Papers 2013/168, International Monetary Fund.
    11. Michael Gapen & Dale Gray & Cheng Hoon Lim & Yingbin Xiao, 2008. "Measuring and Analyzing Sovereign Risk with Contingent Claims," IMF Staff Papers, Palgrave Macmillan, vol. 55(1), pages 109-148, April.
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    Cited by:

    1. Huang, Wei-Qiang & Wang, Dan, 2020. "Financial network linkages to predict economic output," Finance Research Letters, Elsevier, vol. 33(C).

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    More about this item

    Keywords

    risk monitoring; systemic risk; contingent claims analysis (CCA); global VAR;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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