Systemic Risk Modeling How Theory Can Meet Statistics
We propose a framework to link empirical models of systemic risk to theoretical network/ general equilibrium models used to understand the channels of transmission of systemic risk. The theoretical model allows for systemic risk due to interbank counterparty risk, common asset exposures/fire sales,...
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| Other Authors: | , |
| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
2020
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| Series: | IMF Working Papers
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| Online Access: | |
| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | We propose a framework to link empirical models of systemic risk to theoretical network/ general equilibrium models used to understand the channels of transmission of systemic risk. The theoretical model allows for systemic risk due to interbank counterparty risk, common asset exposures/fire sales, and a 'Minsky" cycle of optimism. The empirical model uses stock market and CDS spreads data to estimate a multivariate density of equity returns and to compute the expected equity return for each bank, conditional on a bad macro-outcome. Theses 'cross-sectional" moments are used to re-calibrate the theoretical model and estimate the importance of the Minsky cycle of optimism in driving systemic risk |
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| Physical Description: | 39 pages |
| ISBN: | 9781513536170 |