How to Measure Interconnectedness

Jean-Cyprien Héam
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Jean-Cyprien Héam: EIOPA

No 3, EIOPA Financial Stability Report - Thematic Articles from EIOPA, Risks and Financial Stability Department

Abstract: Interconnectedness is considered as a key component to systemic risk supervision. However, there is little guidance on its measurement. Using a unique dataset of bilateral exposures between 21 French financial institutions, we analyse and compare several strategies to measure interconnectedness. We show that these measures tackle interconnectedness from different vantage points: substitutability, integration, core-periphery, systemic importance and systemic fragility. Without promoting one strategy as a panacea to measure interconnectedness, we provide insights on the pros and cons of each measure.

Keywords: Financial stability; interconnectedness; systemic risk; insurance (search for similar items in EconPapers)
JEL-codes: G22 G28 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2014-12
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Published in Financial Stability Report, EIOPA, December 2014, pages 45-57

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