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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Bibliographic Details
Main Author: Espinoza, Raphael
Other Authors: Segoviano, Miguel, Yan, Ji
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2020
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Systemic Risk Modeling: How Theory Can Meet Statistics  |c Raphael Espinoza, Miguel Segoviano, Ji Yan 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2020 
300 |a 39 pages 
653 |a Micro Finance Institutions 
653 |a Banks and Banking 
653 |a Capital and Ownership Structure 
653 |a General Financial Markets: Government Policy and Regulation 
653 |a Loans 
653 |a Value of Firms 
653 |a Banks 
653 |a Depository Institutions 
653 |a Banking 
653 |a Banks and banking 
653 |a Interbank markets 
653 |a International finance 
653 |a Financial Risk and Risk Management 
653 |a Semiparametric and Nonparametric Methods 
653 |a Consumer loans 
653 |a Financial risk management 
653 |a Financing Policy 
653 |a General Financial Markets: General (includes Measurement and Data) 
653 |a Finance 
653 |a Financial Forecasting and Simulation 
653 |a Mortgages 
653 |a Industries: Financial Services 
653 |a Systemic risk 
653 |a Goodwill 
653 |a Finance: General 
700 1 |a Segoviano, Miguel 
700 1 |a Yan, Ji 
041 0 7 |a eng  |2 ISO 639-2 
989 |b IMF  |a International Monetary Fund 
490 0 |a IMF Working Papers 
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520 |a 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