Systemic risk measures: the simpler the better

Maria Rodriguez-Moreno

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: We compute six different sets of systemic risk measures for a sample of the 20 biggest European and 13 biggest US banks from January 2004 to November 2009. The six measures are based on i) Principal components of the bank’s Credit Default Swaps (CDSs), ii) Interbank interest rate spreads, iii) Structural credit risk models, iv) Collateralized Debt Obligations (CDOs) indexes and their tranches, v) Multivariate densities computed from CDS spreads and vi) Co-Risk measures. We then rank the measures using three different criteria: i) Causality tests, ii) Price discovery tests and iii) their correlation with an index of systemic events. For the European and US markets, the best indicators are the first Principal Component of the single-name CDSs and the LIBOR-OIS or LIBOR-TBILL spreads, respectively, whereas the least reliable indicators are the Co-Risk measures and the systemic spreads extracted from the CDO indexes and their tranches.

Keywords: CoVaR; Systemic; risk; CDS; Libor; spreads (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 G21 (search for similar items in EconPapers)
Date: 2010-09
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Systemic risk measures: The simpler the better? (2013)
Chapter: Systemic risk measures: the simpler the better? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wbrepe:9291

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