Systemic Risk in the Dutch Financial Sector
AbstractThis paper investigates systemic risk in the Dutch financial sector by focusing on extreme returns of the major financial institutions. Our measure of systemic risk is the number of coincidences of extreme returns that cannot be explained by a linear model of constant correlation. By using a Monte Carlo simulation, we find strong evidence of correlation breakdown among the major Dutch financials. This indicates that systemic risk is significant, which has implications for effective prudential supervision. In addition, our results indicate that insurance activities of banks may increase systemic risk.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2003-17.
Date of creation: Dec 2003
Date of revision:
banks; correlation breakdown; extreme co-movements; financial institutions; insurance companies; extreme stock returns; systemic risk;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-CFN-2004-02-29 (Corporate Finance)
- NEP-RMG-2004-02-29 (Risk Management)
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- Carlos Guiné, 2014. "Global Systemically Important Insurers," EIOPA Finacial Stability Report - Thematic Articles 2, EIOPA, Financial Stability and Information Unit.
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