scholarly journals Asymmetric Network Connectedness of Fears

2020 ◽  
pp. 1-41
Author(s):  
Jozef Baruník ◽  
Mattia Bevilacqua ◽  
Radu Tunaru
Keyword(s):  
Network Structure ◽  
Systemic Risk ◽  
Financial System ◽  
Option Prices ◽  
Economic Uncertainty ◽  
Macroeconomic Conditions ◽  
Market Participants ◽  
Risk Monitoring ◽  
Network Connectedness ◽  
Forward Looking

This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks. We argue that this asymmetric network structure extracted from call and put traded option prices of the main U.S. banks contains valuable information for predicting macroeconomic conditions and economic uncertainty, and it can serve as a tool for forward-looking systemic risk monitoring.

scholarly journals Republic of Korea

2020 ◽  
Vol 20 (277) ◽  
Author(s):  
Keyword(s):  
Systemic Risk ◽  
Financial Crises ◽  
Financial System ◽  
Past Experience ◽  
Policy Framework ◽  
The Core ◽  
Rate Analysis ◽  
Macroprudential Policies ◽  
Risk Monitoring ◽  
Risk Oversight

Past experience with financial crises places systemic risk oversight at the core of Korea’s approach to the financial system. The Korean authorities have amassed over a decade of experience with macroprudential policies. They have put in place rigorous and sophisticated processes for risk monitoring. They publish first-rate analysis. And they have actively developed measures to mitigate risks to the financial system—notably from FX exposures, and from household indebtedness—as circumstances have changed. But their system has evolved to be highly complex, which poses challenges for coordination, communication, and transparency; moreover, their toolkit needs to be extended. These areas should be the focus of efforts to strengthen the policy framework.

CoVaR

2016 ◽  
Vol 106 (7) ◽  
pp. 1705-1741 ◽  
Author(s):  
Tobias Adrian ◽  
Markus K. Brunnermeier
Keyword(s):  
At Risk ◽  
Financial Crisis ◽  
Systemic Risk ◽  
Value At Risk ◽  
Asset Price ◽  
Financial System ◽  
Maturity Mismatch ◽  
Out Of Sample ◽  
Forward Looking

We propose a measure of systemic risk, Δ CoVaR, defined as the change in the value at risk of the financial system conditional on an institution being under distress relative to its median state. Our estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict Δ CoVaR. We also provide out-of-sample forecasts of a countercyclical, forward-looking measure of systemic risk, and show that the 2006:IV value of this measure would have predicted more than one-third of realized Δ CoVaR during the 2007–2009 financial crisis. (JEL C58, E32, G01, G12, G17, G20, G32)

Macroprudential Policy Instruments of Central Banks

2012 ◽  
pp. 32-47
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Policy Instruments ◽  
Central Banks ◽  
Macroprudential Policy ◽  
Policy Studies ◽  
The Future ◽  
Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

scholarly journals Systemic risk measurement: bucketing global systemically important banks

2021 ◽  
Author(s):  
Marina Brogi ◽  
Valentina Lagasio ◽  
Luca Riccetti
Keyword(s):  
Systemic Risk ◽  
Financial System ◽  
Capital Requirements ◽  
Insurance Premium ◽  
Risk Measurement ◽  
Marginal Contribution ◽  
General Consensus ◽  
Systemically Important Banks

AbstractThe general consensus on the need to enhance the resilience of the financial system has led to the imposition of higher capital requirements for certain institutions, supposedly based on their contribution to systemic risk. Global Systemically Important Banks (G-SIBs) are divided into buckets based on their required additional capital buffers ranging from 1% to 3.5%. We measure the marginal contribution to systemic risk of 26 G-SIBs using the Distressed Insurance Premium methodology proposed by Huang et al. (J Bank Financ 33:2036–2049, 2009) and examine ranking consistency with that using the SRISK of Acharya et al. (Am Econ Rev 102:59–64, 2012). We then compare the bucketing using the two academic approaches and supervisory buckets. Because it leads to capital surcharges, bucketing should be consistent, irrespective of methodology. Instead, discrepancies in the allocation between buckets emerge and this suggests the complementary use of other methodologies.

scholarly journals Predicting Financial Vulnerability in Malaysia: Evidence From the Signals Approach

2019 ◽  
Vol 10 (3) ◽  
pp. 89 ◽  
Author(s):  
Tai-Hock Kuek ◽  
Chin-Hong Puah ◽  
M. Affendy Arip
Keyword(s):  
Financial Crisis ◽  
Stock Price ◽  
Original Work ◽  
Predictive Power ◽  
Financial System ◽  
Financial Vulnerability ◽  
Macroeconomic Conditions ◽  
Vulnerability Indicator ◽  
Economic Slowdown

This paper aims to investigate Malaysia’s vulnerability to a financial crisis. The methodology employed is an extension of the signals approach based on the original work of Kaminsky and Reinhart (1999). By studying the period from 2000M1 to 2016M9, we construct a financial vulnerability indicator (FVI) to measure the development of vulnerabilities in the Malaysian financial system. Our empirical findings unveil that the causes of crises are multidimensional. Notably, economic slowdown, decline in stock price and weak exports contain good predictive power in assessing financial vulnerability to a crisis. This study highlights the significance of internal and external macroeconomic conditions in determining a country’s vulnerability.

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