Probabilistic approach to measuring early-warning signals of systemic contagion risk
Publication in refereed journal

香港中文大學研究人員

引用次數
替代計量分析
.

其它資訊
摘要This paper proposes a model based on probability density functions associated with dynamics of underlying asset prices to measure contagion-induced systemic risk in the market. The two new risk measures with closed-form formulas derived from the model are (1) the rate of change of the probability of triggering a shock determined by the joint dynamics of prices of systemically important assets/entities and less important ones and (2) the distress correlation between the two types of assets/entities, which can provide forward-looking signals of such risk. The model is applied to the euro-area sovereign debt crisis and demonstrates how systemic liquidity shocks can build up in the sovereign debt market due to contagion between sovereign risk of small countries (i.e., Portugal) and systemically important countries (i.e., Italy and Spain). A signal of the rate of change of the joint probability appeared in April 2011 before the systemic liquidity shock occurred in November 2011. There exist endogenous critical levels of sovereign spreads, above which the signal materializes.
著者Hui CH, Lo CF, Zheng XF, Fong T
期刊名稱International Journal of Financial Engineering
出版年份2018
月份6
卷號5
期次2
出版社WORLD SCIENTIFIC PUBL CO PTE LTD
文章號碼1850010
國際標準期刊號2424-7863
電子國際標準期刊號2424-7944
語言英式英語
關鍵詞Systemic risk, probability density distributions, contagion
Web of Science 學科類別Business, Finance;Business & Economics

上次更新時間 2020-07-08 於 02:37