Contagion Analysis In The Banking Sector

Serge Darolles, Simon Dubecq and Christian Gouriéroux
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Simon Dubecq: European Central Bank - European Central Bank
Christian Gouriéroux: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyses how an external adverse shock will impact the financial situations of banks and insurance companies and how it will diffuse among these companies. In particular we explain how to disentangle the direct and indirect (contagion) effects of such a shock, how to exhibit the contagion network and how to detect the "superspreaders", i.e. the most important firms involved in the contagion process. This method is applied to a network of 8 large European banks in order to analyze whether the revealed interconnections within these banks differ depending on the underlying measure of banks' financial positions, namely their market capitalization, the price of the CDS contract written on their default and their book value.

Keywords: Systemic Risk; Canonical Correlation; Credit Default Swaps; Default Dependence; Contagion (search for similar items in EconPapers)
Date: 2014-05
Note: View the original document on HAL open archive server: https://hal.science/hal-01632869v1
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Published in 31st International French Finance Association Conference, AFFI 2014, May 2014, Aix-en-Provence, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01632869

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