A SIMPLE METHOD FOR MEASURING SYSTEMIC RISK USING CREDIT DEFAULT SWAP MARKET DATA

Sangwon Suh, Inwon Jang and Misun Ahn
Additional contact information
Inwon Jang: Office of the Comptroller of the Currency, USA
Misun Ahn: Korea Asset Pricing, Korea

Journal of Economic Development, 2013, vol. 38, issue 4, 75-100

Abstract: This paper proposes a simple method that employs credit default swap (CDS) data for analyzing systemic risk. The proposed method overcomes inconsistency problems in existing methods and can produce various indicators of systemic risk in a consistent manner. In addition, this method can measure systemic risk contributions. In particular, the method measures systemic risk contributions in both directions, that is, the overall effect of systemic risk on individual credit risks and vice versa. Using CDS data, we employ the proposed method to measure systemic risk for a group of large financial institutions in the U.S. In addition, we provide empirical results for systemic risk contributions as well as various measures of the overall level of systemic risk and verify the applicability of the proposed method.

Keywords: Systemic Risk; Financial Stability; Systemic Risk Contribution; Credit Default Swap (search for similar items in EconPapers)
JEL-codes: C15 E53 G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:38:y:2013:i:4:p:75-100

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