Systemic Risk: a Network Approach

Jean-Baptiste Hasse
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Jean-Baptiste Hasse: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: We propose a new measure of systemic risk based on interconnectedness, defined as the level of direct and indirect links between financial institutions in a correlation-based network. Deriving interconnectedness in terms of risk, we empirically show that within a financial network, indirect links are strengthened during systemic events. The relevance of our measure is illustrated at both local and global levels. Our framework offers policymakers a useful toolbox for exploring the real-time topology of the complex structure of dependencies in financial systems and for measuring the consequences of regulatory decisions.

Keywords: Financial networks; Interconnectedness; Systemic risk; Spillover (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-net and nep-rmg
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