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Financial Network Systemic Risk Contributions

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Author Info

  • Nikolaus Hautsch
  • Julia Schaumburg
  • Melanie Schienle

Abstract

We propose the systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we define the systemic risk beta as the time-varying marginal effect of a firm’s Value-at-risk (VaR) on the system’s VaR. Suitable statistical inference reveals a multitude of relevant risk spillover channels and determines companies’ systemic importance in the U.S. financial system. Our approach can be used to monitor companies’ systemic importance allowing for a transparent macroprudential regulation.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2011-072.

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Length: 65 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2011-072

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Keywords: Systemic risk contribution; systemic risk network; Value at Risk; network topology; two-step quantile regression; time-varying parameters;

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References

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Citations

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Cited by:
  1. Matteo Barigozzi & Christian T. Brownlees, 2013. "Nets: Network estimation for time series," Economics Working Papers 1391, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Shih-Kang Chao & Wolfgang Karl Härdle & Weining Wang, 2012. "Quantile Regression in Risk Calibration," SFB 649 Discussion Papers SFB649DP2012-006, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Nikolaus Hautsch & Julia Schaumburg & Melanie Schienle, 2012. "Financial Network Systemic Risk Contributions," SFB 649 Discussion Papers SFB649DP2012-053, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  4. Nikolaus Hautsch & Julia Schaumburg & Melanie Schienle, 2013. "Forecasting systemic impact in financial networks," SFB 649 Discussion Papers SFB649DP2013-008, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Ulrich Horst & Michael Kupper & Andrea Macrina & Christoph Mainberger, 2011. "Continuous Equilibrium under Base Preferences and Attainable Initial Endowments," SFB 649 Discussion Papers SFB649DP2011-082, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  6. Shih-Kang Chao & Wolfgang Karl Härdle & Hien Pham-Thu, 2014. "Credit Risk Calibration based on CDS Spreads," SFB 649 Discussion Papers SFB649DP2014-026, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Samuel R\"onnqvist & Peter Sarlin, 2013. "From Text to Bank Interrelation Maps," Papers 1306.3856, arXiv.org.
  8. Kraft, Holger & Schmidt, Alexander, 2013. "Systemic risk in the financial sector: What can se learn from option markets?," SAFE Working Paper Series 25, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  9. Raffaele Fiocco, 2011. "Competition and regulation in a differentiated good market," SFB 649 Discussion Papers SFB649DP2011-084, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  10. Patrick Cheridito & Ulrich Horst & Michael Kupper & Traian A. Pirvu, 2011. "Equilibrium Pricing in Incomplete Markets under Translation Invariant Preferences," SFB 649 Discussion Papers SFB649DP2011-083, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  11. Alena Myšičková & Song Song & Piotr Majer & Peter N.C. Mohr & Hauke R. Heekeren & Wolfgang K. Härdle, 2011. "Risk Patterns and Correlated Brain Activities. Multidimensional statistical analysis of fMRI data with application to risk patterns," SFB 649 Discussion Papers SFB649DP2011-085, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  12. PIERRET, Diane, 2013. "The systemic risk of energy markets," CORE Discussion Papers 2013018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Castro, Carlos & Ferrari, Stijn, 2014. "Measuring and testing for the systemically important financial institutions," Journal of Empirical Finance, Elsevier, vol. 25(C), pages 1-14.

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