Interconnectedness and Systemic Risk

This paper investigates the influence of oil demand, oil supply, and risk-driven shocks on the yield curve in the US between 1995 and 2020. The US term-structure shape is modeled by three structural factors, the level, slope, and curvature. Their empirical analysis is performed according to the Diebold-Li modified variant of the widely used Nelson-Siegel model. The technique of wavelet analysis allows investigating the interrelation of shocks in oil prices and the US yield curve along time and frequency domains, simultaneously. We report on low, medium, and high coherence zones, relative to the oil price movements and the changes in the three yield-curve factors. The low coherence intervals indicate the potential for the three latent factors to be used for creating diversification strategies capable of hedging adverse dynamics in the oil market, potentially workable through global crises. We document the variability of dynamic patterns observable for the US sovereign yield factors on per-type-of-shock basis, evidencing the potential role of the US sovereign debt investments for designing cross-asset hedge strategies for commodity and fixed-income markets.

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Oil price shocks and the term structure of the US yield curve: a time–frequency analysis of spillovers and risk transmission

Umar

Gubareva

Теплова

et al. 2022

Ann Oper Res

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The Life Cycle of Systemic Risk and Crises

BERGER,

SEDUNOV

2024

J of Money Credit Banking

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We present a life cycle view of systemic risk and crises that incorporates and synthesizes a number of views and organizes the theoretical and empirical research evidence in a clear fashion. We illustrate how systemic risks build during the boom, are realized during the following crisis, and are well addressed or not in the aftermath, which helps determine how well or poorly the following cycle will likely evolve. We aim to improve current understanding of systemic risk and crises, the roles of the different economic segments of society, highlight key issues of measurement, and provide guidance for future academic research and policy analysis. We address several controversies—the outsized role of the banking sector in creating and resolving systemic risks, its exclusive role in systemic risk measurement, and seemingly irrational behavior in which the same or similar costly mistakes are repeated every cycle.

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Interconnectedness and Systemic Risk

Cited by 2 publications

References 96 publications

Oil price shocks and the term structure of the US yield curve: a time–frequency analysis of spillovers and risk transmission

Oil price shocks and the term structure of the US yield curve: a time–frequency analysis of spillovers and risk transmission

The Life Cycle of Systemic Risk and Crises

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