Towards a Framework for Quantifying Systemic Stability

Piergiorgio Alessandri, Prasanna Gai, Sujit Kapadia, Nada Mora and Claus Puhr
Additional contact information
Prasanna Gai: Australian National University
Claus Puhr: Oesterreichische Nationalbank

International Journal of Central Banking, 2009, vol. 5, issue 3, 47-81

Abstract: This paper describes a prototype quantitative framework for gauging systemic risk which explicitly characterizes banks’ balance sheets and allows for macro credit risk, interest income risk, market risk, network interactions, and asset-side feedback effects. In presenting our results, we focus on projections for systemwide banking assets in the United Kingdom, considering both unconditional distributions and stress scenarios.We show how a combination of extreme credit and trading losses can precipitate fundamental defaults and trigger contagious default associated with network effects and fire sales of distressed assets. Despite the joint normality of all risk factors, the model generates a bimodal asset distribution.

JEL-codes: G01 G21 G32 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb09q3a2.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb09q3a2.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2009:q:3:a:2

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().