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Financial Network Systemic Risk Contributions

  • Nikolaus Hautsch
  • Julia Schaumburg
  • Melanie Schienle

We propose the realized 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 realized systemic risk beta as the total 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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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2012-053.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2012-053.

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Length: 53 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2012-053
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