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How to Measure Interconnectedness

Author

Listed:
  • Jean-Cyprien Héam

    (EIOPA)

Abstract

Interconnectedness is considered as a key component to systemic risk supervision. However, there is little guidance on its measurement. Using a unique dataset of bilateral exposures between 21 French financial institutions, we analyse and compare several strategies to measure interconnectedness. We show that these measures tackle interconnectedness from different vantage points: substitutability, integration, core-periphery, systemic importance and systemic fragility. Without promoting one strategy as a panacea to measure interconnectedness, we provide insights on the pros and cons of each measure.

Suggested Citation

  • Jean-Cyprien Héam, 2014. "How to Measure Interconnectedness," EIOPA Financial Stability Report - Thematic Articles 3, EIOPA, Risks and Financial Stability Department.
  • Handle: RePEc:eio:thafsr:3
    as

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    File URL: https://www.eiopa.europa.eu/sites/default/files/financial_stability/how_to_measure_interconnectedness_dec_2104.pdf
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    References listed on IDEAS

    as
    1. Craig, Ben & von Peter, Goetz, 2014. "Interbank tiering and money center banks," Journal of Financial Intermediation, Elsevier, vol. 23(3), pages 322-347.
    2. Ivan Alves & Stijn Ferrari & Pietro Franchini & Jean-Cyprien Heam & Pavol Jurca & Sam Langfield & Sebastiano Laviola & Franka Liedorp & Antonio Sánchez & Santiago Tavolaro & Guillaume Vuillemey, 2013. "The structure and resilience of the European interbank market," ESRB Occasional Paper Series 03, European Systemic Risk Board.
    3. C. Gouriéroux & J.‐C. Héam & A. Monfort, 2012. "Bilateral exposures and systemic solvency risk," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1273-1309, November.
    4. G. Hauton & J.-C. Héam, 2014. "How to Measure Interconnectedness between Banks, Insurers and Financial Conglomerates?," Débats économiques et financiers 15, Banque de France.
    5. Kartik Anand & Ben Craig & Goetz von Peter, 2015. "Filling in the blanks: network structure and interbank contagion," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 625-636, April.
    6. repec:dau:papers:123456789/14967 is not listed on IDEAS
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    More about this item

    Keywords

    Financial stability; interconnectedness; systemic risk; insurance;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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