Systemic Risk and Community Structure in the European Banking System

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F17%3A10237644" target="_blank" >RIV/61989100:27510/17:10237644 - isvavai.cz</a>
Result on the web
<a href="http://fim2.uhk.cz/mme/conferenceproceedings/mme2017_conference_proceedings.pdf" target="_blank" >http://fim2.uhk.cz/mme/conferenceproceedings/mme2017_conference_proceedings.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Systemic Risk and Community Structure in the European Banking System
Original language description
Financial contagion and systemic risk have become increasingly relevant after the financial crisis in 2008. Network theory is a powerful framework for the analysis of these phenomena and is becoming a standard tool in the literature. This paper investigates the properties of the European banking system, focusing on the community structure of the network to identify the potential channels for the propagation of financial distress. The network structure is estimated from the sparse partial correlation of CDS spreads using tlasso, a robust technique that induces sparsity in the network. The optimal community structure is then estimated by a procedure that maximises modularity. The analysis shows that, despite the high level of internationalization of the financial system, it exist a clear community structure that mirrors the geographical location of the banks. Finally, a decomposition of strength centrality based on the estimated community structure is provided. Such decomposition represents a useful and easy-to-implement tool to monitor the exposure to financial contagion, integrating the traditional risk management tools.
Czech name
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Czech description
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Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Mathematical Methods in Economics: MME 2017 : 35th international conference : book of abstracts : Hradec Králové, Czech Republic, September 13th-15th, 2017
ISBN
978-80-7435-678-0
ISSN
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e-ISSN
neuvedeno
Number of pages
6
Pages from-to
807-812
Publisher name
Gaudeamus
Place of publication
Hradec Králové
Event location
Hradec Králové
Event date
Sep 13, 2017
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000427151400138

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