Measures of systemic risk and financial fragility in Korea

Jong Lee (), Jaemin Ryu () and Dimitrios Tsomocos

Annals of Finance, 2013, vol. 9, issue 4, 757-786

Abstract: This paper provides a quantitative metric for financial stability of Korean commercial banking system based on the Tsomocos (J Math Econ 39(5–6):619–655, 2003 ) model, for which we use market data as proxies for probabilities of default and equity valuation of the banking sector. We estimate the effect of the probability of default and the equity valuation of the banking sector on real output using a vector error correction model (VECM). In addition, we estimate the contributions of individual banks to systemic risk using CoVaR and MES (Marginal Expected Shortfall). CoVaR is estimated based on the methodology of Adrian and Brunnermeier ( 2010 ), and MES is estimated based on Shapley value methodology which has been introduced by Tarashev et al. ( 2010 ). Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Financial stability; Systemic risk; JPoD; CoVaR; MES; Shapley value; E30; E44; G01; G10; G18; G20; G28 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Working Paper: Measures of Systemic Risk and Financial Fragility in Korea (2012)
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DOI: 10.1007/s10436-012-0218-x

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