Systemic Risk in Europe
Robert F. Engle
New York University - Leonard N. Stern School of Business - Department of Economics; New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)
University of Lausanne; Swiss Finance Institute
University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); Swiss Finance Institute
February 1, 2014
Review of Finance (2015) 19(1), 145-190
Systemic risk may be defined as the propensity of a financial institution to be undercapitalized when the financial system as a whole is undercapitalized. In this paper, we investigate the case of non-U.S. institutions, with several factors explaining the dynamics of financial firms returns and with asynchronicity of time zones. We apply this methodology to the 196 largest European financial firms and estimate their systemic risk over the 2000-2012 period. We find that, for certain countries, the cost for the taxpayer to rescue the riskiest domestic banks is so high that some banks might be considered too big to be saved.
Number of Pages in PDF File: 55
Keywords: Systemic Risk, Marginal Expected Shortfall, Multi-factor Model
JEL Classification: C32, G01,G20, G28, G32
Date posted: December 22, 2012 ; Last revised: February 9, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.312 seconds