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Systemic Risk and Asymmetric Responses in the Financial Industry [electronic resource] López-Espinosa, Germán.

Author/Creator:
López-Espinosa, Germán.
Publication:
Washington, D.C. : International Monetary Fund, 2012.
Format/Description:
Government document
Book
1 online resource (38 p.)
Series:
IMF eLibrary
IMF Working Papers; Working Paper No. 12/152.
IMF Working Papers; Working Paper No. 12/152
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Local subjects:
Autocorrelation. (search)
Banking systems. (search)
Benchmark bond. (search)
Bond. (search)
Bond returns. (search)
Bond yields. (search)
Commercial banks. (search)
Confidence interval. (search)
Consistent estimate. (search)
Corporate bond. (search)
Correlation. (search)
Correlations. (search)
Covariance. (search)
Descriptive statistics. (search)
Dummy variable. (search)
Dummy variables. (search)
Economic models. (search)
Equation. (search)
Equations. (search)
Equity market. (search)
Equity markets. (search)
Explanatory power. (search)
Financial assets. (search)
Financial economics. (search)
Financial institutions. (search)
Financial markets. (search)
Financial regulation. (search)
Financial risk. (search)
Financial sector. (search)
Financial services. (search)
Financial stability. (search)
Financial system. (search)
Financial volatility. (search)
Forecasting. (search)
Functional form. (search)
Heteroscedasticity. (search)
International standards. (search)
Linear model. (search)
Martingale. (search)
Measurement errors. (search)
Money markets. (search)
Moral hazard. (search)
Nonlinear models. (search)
Number of parameters. (search)
Perturbations. (search)
Predictions. (search)
Probabilities. (search)
Probability. (search)
Probability distribution. (search)
Rate of change. (search)
Regression analysis. (search)
Risk management. (search)
Sample mean. (search)
Sample size. (search)
Samples. (search)
Sampling. (search)
Standard deviation. (search)
Statistic. (search)
Statistical analysis. (search)
Statistical inference. (search)
Statistical measure. (search)
Statistics. (search)
Stock market. (search)
Stock market volatility. (search)
Stock price. (search)
Stock returns. (search)
Stockholders. (search)
Survey. (search)
Surveys. (search)
Time series. (search)
Treasury bond. (search)
United States. (search)
Summary:
To date, an operational measure of systemic risk capturing non-linear tail comovement between system-wide and individual bank returns has not yet been developed. This paper proposes an extension of the so-called CoVaR measure that captures the asymmetric response of the banking system to positive and negative shocks to the market-valued balance sheets of individual banks. For the median of our sample of U.S. banks, the relative impact on the system of a fall in individual market value is sevenfold that of an increase. Moreover, the downward bias in systemic risk from ignoring this asymmetric pattern increases with bank size. The conditional tail comovement between the banking system and a top decile bank which is losing market value is 5.4 larger than the unconditional tail comovement versus only 2.2 for banks in the bottom decile. The asymmetric model also produces much better estimates and fitting, and thus improves the capacity to monitor systemic risk. Our results suggest that ignoring asymmetries in tail interdependence may lead to a severe underestimation of systemic risk in a downward market.
Notes:
Description based on print version record.
Contributor:
López-Espinosa, Germán.
Moreno, Antônio.
Rubia, Antonio.
Valderrama, Laura.
Other format:
Print Version:
ISBN:
1475504349:
9781475504347
ISSN:
1018-5941
Publisher Number:
10.5089/9781475504347.001
Access Restriction:
Restricted for use by site license.