Banking Stability Measures
AbstractThe recent crisis underlined that proper estimation of distress-dependence amongst banks in a global system is essential for financial stability assessment. We present a set of banking stability measures embedding banks’ linear (correlation) and nonlinear distress-dependence, and their changes through the economic cycle, thereby allowing analysis of stability from three complementary perspectives: common distress in the system, distress between specific banks, and cascade effects associated with a specific bank. Our approach defines the banking system as a portfolio of banks and infers its multivariate density from which the proposed measures are estimated. These can be provided for developed and developing countries.
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Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Discussion Papers with number dp627.
Date of creation: Jan 2009
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Web page: http://www.lse.ac.uk/fmg/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-05 (All new papers)
- NEP-BAN-2009-04-05 (Banking)
- NEP-CBA-2009-04-05 (Central Banking)
- NEP-PKE-2009-04-05 (Post Keynesian Economics)
- NEP-RMG-2009-04-05 (Risk Management)
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