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Journal Articles Empirical Economics Year : 2022

Systemic risk: a network approach

Abstract

We propose a new measure of systemic risk based on interconnectedness, defined as the level of direct and indirect links between financial institutions in a correlation-based network. Deriving interconnectedness in terms of risk, we empirically show that within a financial network, indirect links are strengthened during systemic events. The relevance of our measure is illustrated at both local and global levels. Our framework offers policymakers a useful toolbox for exploring the real-time topology of the complex structure of dependencies in financial systems and for measuring the consequences of regulatory decisions.

Dates and versions

hal-03740283 , version 1 (29-07-2022)

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Cite

Jean-Baptiste Hasse. Systemic risk: a network approach. Empirical Economics, 2022, 63 (1), pp.313-344. ⟨10.1007/s00181-021-02131-2⟩. ⟨hal-03740283⟩
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