Can Bank-Specific Variables Predict Contagion Effects?

Siebenbrunner, Christoph; Sigmund, Michael; Kerbl, Stefan

doi:10.2139/ssrn.2730552

Cited by 4 publications

(17 citation statements)

References 86 publications

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“…Mark-to-market accounting can foster the vicious circle of higher losses, leading to more defaults by forcing even non-defaulting institutions to recognize depressed asset prices. A similar model was used in Siebenbrunner et al (2017). The main difference to the model presented herein is that Siebenbrunner et al (2017) assumed a zero payoff from one bank that is subject to an idiosyncratic shock, whereas the payoffs herein are computed the same way for all banks, as the residual assets after a shock.…”

Section: Model Frameworkmentioning

confidence: 99%

“…The value of interbank assets depends on how much each debtor bank is able to repay: solvent banks repay all their liabilities in full, while insolvent banks split the remaining value of their assets minus any liquidation costs proportionally among their creditors. For a given payment vector p ∈ R n + , the value of interbank assets is given by p ∈ R n + (Siebenbrunner et al 2017). Figure 1 shows the structure of such stylized, interlinked balance sheets.…”

Section: Definition Of a Financial Systemmentioning

confidence: 99%

“…3.5. The equilibrium price for this model can be computed through a simple recursion α n+1 = 1 (α n ) initialized with α 0 = 1, which converges to the greatest fixed point α * ,1 ( ) in a finite number of steps, as shown by Siebenbrunner et al (2017).…”

Section: Fire Sale Endogeneitiesmentioning

confidence: 99%

“…As in Siebenbrunner et al (2017), I assume a demand function for the common asset which decreases in the amount of the common asset sold by all banks that are under liquidation. Examples of such demand functions can be found in the literature (Cifuentes et al 2005;Caccioli et al 2015).…”

Section: A Model Of Price Formation Under Asset Fire Sales With Overlmentioning

confidence: 99%

“…In order for a firesale market to exist, I assume κ > 0. Such external buyers could be banks in other countries (or simply not included in the sample, if only a subset of the entire system is considered) or other financial entities such as investment funds (Siebenbrunner et al 2017). This property allows for calibrating the κ-parameter, as explained in Sect.…”

Section: A Model Of Price Formation Under Asset Fire Sales With Overlmentioning

confidence: 99%

See 4 more Smart Citations

Quantifying the importance of different contagion channels as sources of systemic risk

Siebenbrunner

2020

J Econ Interact Coord

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A framework that allows computing contagion effects from both direct exposure contagion and overlapping portfolios is presented. The effects of the latter are broken down into loss correlation, effects from fire sales and mark-to-market accounting. The impact can be quantified for any single contagion channel as well as when multiple channels are jointly active. The model can be used to compute contagion losses that are consistent with a given macroeconomic scenario and thus provides a macroprudential extension for microprudential stress tests. Empirical results for a real-world banking system suggest that contagion effects stemming from direct exposures have the highest loss contribution.

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Section: Model Frameworkmentioning

confidence: 99%

Section: Definition Of a Financial Systemmentioning

confidence: 99%

Section: Fire Sale Endogeneitiesmentioning

confidence: 99%

Section: A Model Of Price Formation Under Asset Fire Sales With Overlmentioning

confidence: 99%

Section: A Model Of Price Formation Under Asset Fire Sales With Overlmentioning

confidence: 99%

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Quantifying the importance of different contagion channels as sources of systemic risk

Siebenbrunner

2020

J Econ Interact Coord

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Financial contagion in real economy: The key role of policy uncertainty

2020

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This paper studies the spread of the Subprime Crisis and the European Sovereign Debt Crisis from Eurozone countries to the real economy by examining 10 sectors in major developed and emerging stock markets. First, we employ Cappiello et al., Journal of Financial Economics, 2006, 4, 537-572 model and copula functions to detect and cross-check the correlations and the contagion thereafter. Second, we uncover evidence of correlation behaviour between policy uncertainty indexes and stock market returns. The results demonstrate that no country and sector was immune to spillover effects, highlighting the limited effectiveness of policy makers for both the Subprime Crisis and the European Sovereign Debt Crisis. The empirical application provides evidence of significant volatility and tail dependence from the financial sector to many real sectors in the U.S. economy. Additionally, there is clear evidence that certain sectors, particularly Healthcare, Telecommunications, Utilities and Technology, were less severely affected by the crisis, as observed by Baur,

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The capital buffer calibration for other systemically important institutions‐Is the country heterogeneity in the EU caused by regulatory capture?

Sigmund

2022

Scottish J Political Eco

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The Working Paper series of the Oesterreichische Nationalbank is designed to disseminate and to provide a platform for Working Paper series of the Oesterreichische Nationalbank is designed to disseminate and to provide a platform for Working Paper series of the Oesterreichische Nationalbank discussion of either work of the staff of the OeNB economists or outside contributors on topics which are of special interest to the OeNB. To ensure the high quality of their content, the contributions are subjected to an international refereeing process. The opinions are strictly those of the authors and do in no way commit the OeNB.The Working Papers are also available on our website (http://www.oenb.at) and they are indexed in RePEc (http://repec.org/).

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Can Bank-Specific Variables Predict Contagion Effects?

Cited by 4 publications

References 86 publications

Quantifying the importance of different contagion channels as sources of systemic risk

Quantifying the importance of different contagion channels as sources of systemic risk

Financial contagion in real economy: The key role of policy uncertainty

The capital buffer calibration for other systemically important institutions‐Is the country heterogeneity in the EU caused by regulatory capture?

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