Assessing systemic fragility – a probabilistic perspective

  • We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic fragility indicators for euro area banks and sovereigns, based on CDS prices. Our analysis documents that although the fragility of the euro area banking system had started to deteriorate before Lehman Brothers' file for bankruptcy, investors did not expect the crisis to affect euro area sovereigns' solvency until September 2008. Since then, and especially after November 2009, joint sovereign default risk has outpaced the rise of systemic risk within the banking system.

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Metadaten
Author:Deyan Radev
URN:urn:nbn:de:hebis:30:3-350141
DOI:https://doi.org/10.2139/ssrn.2514279
Parent Title (English):SAFE working paper series ; No. 70
Series (Serial Number):SAFE working paper (70)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/11/03
Tag:Banking Stability; Contagion; Financial Distress; Tail Risk
Issue:October 1, 2014
Page Number:39
HeBIS-PPN:351017224
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C1 Econometric and Statistical Methods: General / C16 Specific Distributions
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht