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Risk-Factor Portfolios and Financial Stability (Garita G.)

Contagion in Banking Risk-taking and Risk Management Stability&Soundness Structure of Assets&Liabilities

Abstract By utilizing the extreme dependence structure and the conditional probability of joint failure (CPJF) among risk factors, this paper characterizes a risk-stability index (RSI) that quantifies (i) common distress of risk factors, (ii) distress between specific risk factors, and (iii) distress to a portfolio related to a specific risk factor. The results show that financial stability is a continuum; that U.S. banks tend to cause the most stress to the global financial system (as defined herein); and that Asian banks show the most persistence of distress. Further, the panel VAR indicates that "leaning against the wind" reduces the (potential) instability of a financial system.
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Libref/ Garita G. (2010) “Risk-Factor Portfolios and Financial Stability”, pp. 1-46
© Программирование — Александр Красильников, 2008
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