Financial Network Systemic Risk Contributions

57 Pages Posted: 26 Aug 2013

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS); Vienna Graduate School of Finance (VGSF)

Julia Schaumburg

Tinbergen Institute; VU University Amsterdam

Melanie Schienle

Humboldt University of Berlin - School of Business and Economics

Date Written: August 25, 2013

Abstract

We propose the realized systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we define the realized systemic risk beta as the total time-varying marginal effect of a firm’s Value-at-Risk (VaR) on the system’s VaR. Suitable statistical inference reveals a multitude of relevant risk spillover channels and determines companies’ systemic importance in the U.S. financial system. Our approach can be used to monitor companies’ systemic importance allowing for a transparent macroprudential regulation.

Keywords: systemic risk contribution, systemic risk network, Value at Risk, network topology, two-step quantile regression, time-varying parameters

JEL Classification: G01, G18, G32, G38, C21, C51, C63

Suggested Citation

Hautsch, Nikolaus and Schaumburg, Julia and Schienle, Melanie, Financial Network Systemic Risk Contributions (August 25, 2013). Available at SSRN: https://ssrn.com/abstract=2315826 or http://dx.doi.org/10.2139/ssrn.2315826

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Julia Schaumburg

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

HOME PAGE: http://juliaschaumburg.com

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands
+31 (0)20 59 82653 (Phone)

HOME PAGE: http://juliaschaumburg.com

Melanie Schienle

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

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