Bank fragility and contagion: evidence from the bank CDS market
Fecha
2016Versión
Acceso abierto / Sarbide irekia
Tipo
Artículo / Artikulua
Versión
Versión aceptada / Onetsi den bertsioa
Impacto
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10.1016/j.jempfin.2016.01.011
Resumen
Understanding how contagion works among financial institutions is a top priority for regulators and policy makers who aim to foster financial stability and to prevent financial crises. Using bank credit default swap (CDS) data, we provide a framework for the evaluation of contagion among banks in different countries and regions during a period of prolonged financial distress. We measure contagion ...
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Understanding how contagion works among financial institutions is a top priority for regulators and policy makers who aim to foster financial stability and to prevent financial crises. Using bank credit default swap (CDS) data, we provide a framework for the evaluation of contagion among banks in different countries and regions during a period of prolonged financial distress. We measure contagion in terms of return spillovers, following a Generalized VAR (GVAR) approach. In addition, we propose an innovative framework to distinguish between two types of contagion: systematic (linked to global factors), and idiosyncratic (linked to bank specific factors). We find evidence of both types of contagion, although the spillover dynamics changed over time. Our measure of systematic contagion is always greater than the idiosyncratic component, thus highlighting the importance of common factors in the propagation of risk spillovers. This indicates that international linkages among banking markets are central to the transmission of shocks. [--]
Materias
Credit default swaps,
Contagion,
GVAR,
Spillover indices,
Financial stability
Editor
Elsevier
Publicado en
Journal of Empirical Finance, 38 (2016) 394-416
Departamento
Universidad Pública de Navarra. Departamento de Gestión de Empresas /
Nafarroako Unibertsitate Publikoa. Enpresen Kudeaketa Saila
Versión del editor
Entidades Financiadoras
Laura Ballester and Ana González-Urteaga would like to express their gratitude for the funding received from Fundación Ramón Areces. Ana González-Urteaga acknowledges financial support from ECO2012-34268, ECO2012-35946 and from Cass Business School under the Pump Priming Grant Scheme.