Systemic Risk and Community Structure in the European Banking System

Kód výsledku v 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>

Výsledek na webu

<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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Jazyk výsledku

angličtina

Název v původním jazyce

Systemic Risk and Community Structure in the European Banking System

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

Systemic Risk and Community Structure in the European Banking System

Popis výsledku anglicky

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.

Druh

D - Stať ve sborníku

CEP obor

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OECD FORD obor

50206 - Finance

Projekt

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Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2017

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

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

Počet stran výsledku

6

Strana od-do

807-812

Název nakladatele

Gaudeamus

Místo vydání

Hradec Králové

Místo konání akce

Hradec Králové

Datum konání akce

13. 9. 2017

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000427151400138