Networks in risk spillovers: A multivariate GARCH perspective

Monica Billio, Massimiliano Caporin, Lorenzo Frattarolo () and Loriana Pelizzon ()
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Lorenzo Frattarolo: Department of Economics, Ca' Foscari University of Venice

No 2020:16, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We propose a spatiotemporal approach for modeling risk spillovers using time-varying proximity matrices based on observable financial networks and introduce a new bilateral Multivariate GARCH speci_cation. We study covariance stationarity and identification of the model, develop the quasi-maximum-likelihood estimator and analyze its consistency and asymptotic normality. We show how to isolate risk channels and we discuss how to compute target exposure able to reduce system variance. An empirical analysis on Euroarea bond data shows that Italy and Ireland are key players in spreading risk, France and Portugal are major risk receivers, and we uncover Spain's non-trivial role as risk middleman.

Keywords: Spatial GARCH; network; risk spillover; financial spillover (search for similar items in EconPapers)
JEL-codes: C58 G10 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2020
New Economics Papers: this item is included in nep-ets, nep-net, nep-ore and nep-rmg
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Related works:
Journal Article: Networks in risk spillovers: A multivariate GARCH perspective (2023)
Working Paper: Networks in risk spillovers: A multivariate GARCH perspective (2018)
Working Paper: Networks in risk spillovers: a multivariate GARCH perspective (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2020:16

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