Measures of Systemic Risk and Financial Fragility in Korea

Jong Han Lee (), Jaemin Ryu () and Dimitrios Tsomocos
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Jong Han Lee: Marcroprudential Analysis Department, The Bank of Korea
Jaemin Ryu: Marcroprudential Analysis Department, The Bank of Korea

No 2012-12, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper provides a quantitative metric for financial stability of Korean banking system based on the Tsomocos (2003a, b) 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 in order to measure the financial fragility 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, Borio and Tsatsaronis (2010).

Keywords: Financial Stability; Systemic Risk; JPoD; CoVaR; MES; Shapley value (search for similar items in EconPapers)
JEL-codes: E30 E44 G01 G10 G18 G20 G28 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2012-08-03
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Citations: View citations in EconPapers (1)

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http://imer.bok.or.kr/attach/imer_kor/1229/2012/09/1347442205214.pdf Working Paper, 2012 (application/pdf)

Related works:
Journal Article: Measures of systemic risk and financial fragility in Korea (2013)
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