Measuring contagion risk in international banking
Stefan Avdjiev (),
Paolo Giudici () and
Journal of Financial Stability, 2019, vol. 42, issue C, 36-51
We propose a distress measure for national banking systems that incorporates not only banks’ CDS spreads, but also how they interact with the rest of the global financial system via multiple linkage types. The measure is based on a tensor decomposition method that extracts an adjacency matrix from a multi-layer network, measured using banks’ foreign exposures obtained from the BIS international banking statistics. Based on this adjacency matrix, we develop a new network centrality measure that can be interpreted in terms of a banking system's credit risk or funding risk.
Keywords: International banking; Contagion risk; Multi-layer networks; Tensor decompositions (search for similar items in EconPapers)
JEL-codes: G01 C58 C63 (search for similar items in EconPapers)
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Working Paper: Measuring contagion risk in international banking (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:42:y:2019:i:c:p:36-51
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