An Inquiry into Banking Portfolios and Financial Stability Surrounding "The Great Recession"
AbstractBy utilizing the extreme dependence structure and the conditional probability of joint failure (CPJF) between banks, this paper characterizes a risk-stability index (RSI) that quantifies (i) common distress of banks, (ii) distress between specific banks, and (iii) distress to a portfolio related to a specific bank. The results show that financial stability is a continuum; that the Korean and U.S. banking systems seem more prone to systemic risk; and that Asian banks experience the most persistence of distress. Furthermore, a panel VAR indicates that "leaning against the wind" reduces the instability of a financial system.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25996.
Date of creation: 18 Oct 2010
Date of revision:
Conditional probability of joint failure; contagion; dependence structure; distress; multivariate extreme value theory; panel VAR; persistence; risk.;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-30 (All new papers)
- NEP-BAN-2010-10-30 (Banking)
- NEP-RMG-2010-10-30 (Risk Management)
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