RISK CONTAGION DUE TO OVERLAPPING PORTFOLIOS WITH LEVERAGE DECISION

Ziyan Zhu and Xiaoxing Liu ()
Additional contact information
Ziyan Zhu: School of Economics and Management, Southeast University, No. 2 SEU Road, Nanjing, Jiangsu Province, 211189, P. R. China
Xiaoxing Liu: School of Economics and Management, Southeast University, No. 2 SEU Road, Nanjing, Jiangsu Province, 211189, P. R. China

Advances in Complex Systems (ACS), 2021, vol. 24, issue 07n08, 1-29

Abstract: Since the subprime mortgage crisis, it is urgent to quantify the systemic financial risk and the network externality from the vulnerable perspective. Based on the overlapping portfolio, this study constructs an optimal leverage decision-making model with deleveraging and the fire sales mechanism to describe the liquidity risk spillover effects. Through the empirical results, the institution of a larger size should be more systematically important. Higher leverages account for more vulnerability, while institutions with higher interest ratios of revenue or cost and capital adequacy ratios would be more invulnerable.

Keywords: Overlapping portfolio; leverage decision; fire sales; systemic risk; liquidity risk spillover (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219525921500181
Access to full text is restricted to subscribers

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:wsi:acsxxx:v:24:y:2021:i:07n08:n:s0219525921500181

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219525921500181

Access Statistics for this article

Advances in Complex Systems (ACS) is currently edited by Frank Schweitzer

More articles in Advances in Complex Systems (ACS) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().