Systemic risk in a structural model of bank default linkages
Yvonne Kreis and
Dietmar P.J. Leisen
Journal of Financial Stability, 2018, vol. 39, issue C, 221-236
We study a structural model of individual bank defaults across the banking sector; banks are interconnected through their exposure to a common risk factor. The paper introduces a systemic risk measure based on the default frequency in the banking sector; this measure depends non-linearly on the factor's loadings, in contrast to previous systemic risk measures that depend linearly on loadings. We estimate loadings in the U.S. banking system over the course of the last 36 years; we find that they have considerably increased over time and identify four major regimes. Our measure shows that systemic risk became critical in the last of our four regimes, covering the most recent time period from 05/2007 to 09/2016. The empirical findings highlight that our measure complements existing systemic risk measures.
Keywords: Default; Structural model; Systemic risk; Macro-prudential regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:39:y:2018:i:c:p:221-236
Access Statistics for this article
Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman
More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().