Arbeitspapier
Network linkages to predict bank distress
Building on the literature on systemic risk and financial contagion, the paper introduces estimated network linkages into an early-warning model to predict bank distress among European banks. We use multivariate extreme value theory to estimate equity-based tail-dependence networks, whose links proxy for the markets' view of bank interconnectedness in case of elevated financial stress. The paper finds that early warning models including estimated tail dependencies consistently outperform bank-specific benchmark models with- out networks. The results are robust to variation in model specification and also hold in relation to simpler benchmarks of contagion. Generally, this paper gives direct support for measures of interconnectedness in early-warning models, and moves toward a unified representation of cyclical and cross-sectional dimensions of systemic risk.
- ISBN
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978-92-899-1641-7
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 1828
- Classification
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Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Bankruptcy; Liquidation
Quantitative Policy Modeling
Network Formation and Analysis: Theory
- Subject
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bank distress
bank networks
systemic risk
- Event
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Geistige Schöpfung
- (who)
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Peltonen, Tuomas A.
Sarlin, Peter
Piloiu, Andreea
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
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2015
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Peltonen, Tuomas A.
- Sarlin, Peter
- Piloiu, Andreea
- European Central Bank (ECB)
Time of origin
- 2015