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Systemic risk measures: the simpler the better?

In: Macroprudential regulation and policy

Author

Listed:
  • María Rodríguez-Moreno

    (Universidad Carlos III de Madrid)

  • Juan Ignacio Peña

    (Universidad Carlos III de Madrid)

Abstract

We compute six different sets of systemic risk measures for a sample of the 20 biggest European and 13 biggest US banks from January 2004 to November 2009. The six measures are based on i) Principal components of the bank’s Credit Default Swaps (CDSs), ii) Interbank interest rate spreads, iii) Structural credit risk models, iv) Collateralized Debt Obligations (CDOs) indexes and their tranches, v) Multivariate densities computed from CDS spreads and vi) Co-Risk measures. We then rank the measures using three different criteria: i) Causality tests, ii) Price discovery tests and iii) their correlation with an index of systemic events. For the European and US markets, the best indicators are the first Principal Component of the single-name CDSs and the LIBOR-OIS or LIBOR-TBILL spreads, respectively, whereas the least reliable indicators are the Co-Risk measures and the systemic spreads extracted from the CDO indexes and their tranches.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • María Rodríguez-Moreno & Juan Ignacio Peña, 2011. "Systemic risk measures: the simpler the better?," BIS Papers chapters,in: Bank for International Settlements (ed.), Macroprudential regulation and policy, volume 60, pages 29-35 Bank for International Settlements.
  • Handle: RePEc:bis:bisbpc:60-04
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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