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The Role of Correlation in Systemic Risk: Mechanisms, Effects, and Policy Implications

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Stefano Zedda

    (Università di Cagliari)

  • Michele Patanè

    (Università di Siena)

  • Luana Miggiano

    (Università di Siena)

Abstract

In this study, we analyzed the role of correlation in the interbank contagion mechanism, showing that the risk contribution of each bank is generally both influenced by the considered bank correlation to common variables, and by the system average correlation to the same variables. We also verified that the banks’ sensitivity to correlation is highly variable, but can be proxied on the base of some balance sheet values. These findings can provide significant references for a more effective regulation and supervision.

Suggested Citation

  • Stefano Zedda & Michele Patanè & Luana Miggiano, 2021. "The Role of Correlation in Systemic Risk: Mechanisms, Effects, and Policy Implications," Springer Books, in: Marco Corazza & Manfred Gilli & Cira Perna & Claudio Pizzi & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 395-401, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-78965-7_58
    DOI: 10.1007/978-3-030-78965-7_58
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