Fire-sale Spillovers and Systemic Risk

116 Pages Posted: 16 Oct 2013 Last revised: 6 Dec 2019

See all articles by Fernando Duarte

Fernando Duarte

Brown University

Thomas M. Eisenbach

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: June 1, 2018


We identify and track over time the factors that make the financial system vulnerable to fire sales by constructing an index of aggregate vulnerability. The index starts increasing quickly in 2004, before most other major systemic risk measures, and triples by 2008. The fire-sale-specific factors of delevering speed and concentration of illiquid assets account for the majority of this increase. Individual banks’ contributions to aggregate vulnerability predict other firm-specific measures of systemic risk, including SRISK and DCoVaR. The balance sheet-based measures we propose are therefore a useful early indicator of when and where vulnerabilities are building up.

Keywords: systemic risk, fire-sale externalities, leverage, linkage, concentration, bank holding company

JEL Classification: G01, G10, G18, G20, G21, G23, G28, G32

Suggested Citation

Duarte, Fernando and Eisenbach, Thomas M., Fire-sale Spillovers and Systemic Risk (June 1, 2018). FRB of New York Staff Report No. 645, Available at SSRN: or

Fernando Duarte (Contact Author)

Brown University ( email )

64 Waterman Street
Providence, RI 02912
United States


Thomas M. Eisenbach

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6089 (Phone)


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