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Financial network systemic risk contributions

  • Hautsch, Nikolaus
  • Schaumburg, Julia
  • Schienle, Melanie

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 as well as 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. 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 supervision.

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Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2013/20.

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Date of creation: 2013
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Handle: RePEc:zbw:cfswop:201320
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