Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098167 | Journal of Economic Dynamics and Control | 2016 | 41 Pages |
Abstract
In this paper, we propose a novel methodology to measure systemic risk in networks composed of financial institutions. Our procedure combines the impact effects obtained from stress measures that rely on feedback centrality properties with the default probabilities of institutions. We also present new heuristics for designing feasible and relevant stress-testing scenarios that can subside regulators in financial system surveillance tasks. We develop a methodology to extract banking communities and show that these communities have a relevant effect on systemic risk. We find that these communities are mostly composed of non-large banks, suggesting that regulators should also broaden their surveillance efforts to these banking communities other than to the usual SIFIs and large banks. Finally, our results provide insights and guidelines for policymakers.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Sergio Rubens Stancato de Souza, Thiago Christiano Silva, Benjamin Miranda Tabak, Solange Maria Guerra,