Spillover effects among financial institutions: A state-dependent sensitivity value-at-risk approach

Zeno Adams, Roland Füss () and Reint Gropp

No 20, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: In this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). Within a system of quantile regressions for four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions. Using daily data, we can trace out the spillover effects over time in a set of impulse response functions and find that they reach their peak after 10 to 15 days.

Keywords: Risk spillovers; state-dependent sensitivity value-at-risk (SDSVaR); quantile regression; financial institutions; hedge funds (search for similar items in EconPapers)
JEL-codes: G01 G10 G24 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Spillover Effects among Financial Institutions: A State-Dependent Sensitivity Value-at-Risk Approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:20

DOI: 10.2139/ssrn.2267853

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