Systemic risk: a network approach

Jean-Baptiste Hasse

Empirical Economics, 2022, vol. 63, issue 1, No 11, 313-344

Abstract: 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)
JEL-codes: G01 G15 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00181-021-02131-2

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