The Multivariate Nature of Systemic Risk: Direct and Common Exposures

Posted: 4 Jun 2016

See all articles by Paolo Giudici

Paolo Giudici

University of Pavia

Peter Sarlin

Hanken School of Economics; RiskLab Finland

A. Spelta


Date Written: May 31, 2016


To capture systemic risk related to network structures, this paper introduces a measure that complements direct exposures with common exposures, as well as compares these to each other. Trying to address the interconnected nature of financial systems, researchers have recently proposed a range of approaches for assessing network structures. Much of the focus is on direct exposures or market-based estimated networks, yet little attention has been given to the multivariate nature of systemic risk, indirect exposures and overlapping portfolios. In this regard, we rely on correlation network models that tap into the multivariate network structure, as a viable means to assess common exposures and complement direct linkages. Using BIS data, we compare correlation networks with direct exposure networks based upon conventional network measures, as well as we provide an approach to aggregate these two components for a more encompassing measure of interconnectedness.

Keywords: Bank of International Settlements data, Correlation networks, Exposure networks

JEL Classification: G01, C58, C63

Suggested Citation

Giudici, Paolo and Sarlin, Peter and Spelta, A., The Multivariate Nature of Systemic Risk: Direct and Common Exposures (May 31, 2016). Available at SSRN: or

Paolo Giudici (Contact Author)

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100

Peter Sarlin

Hanken School of Economics

PO Box 479
FI-00101 Helsinki

RiskLab Finland ( email )

Turku, 20520


A. Spelta

Independent ( email )

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