We measure a systemic risk faced by European banking sectors using the CoVaR measure. We propose the conditional value-at-risk (CoVaR) for measuring a spillover risk which demonstrates the bilateral relation between the tail risks of two financial institutions. The aim of the study is to...

This paper proposes a systemic risk index based on Functional Data Analysis (FDA), overcoming salient shortcomings of standard methodologies related to data usage, data sparseness, and high dimensionality issues. Using Mexican data, a set of systemic risk indexes are constructed and we show that...

This paper proposes a systemic risk index based on Functional Data Analysis (FDA), overcoming salient shortcomings of standard methodologies related to data usage, data sparseness, and high dimensionality issues. Using Mexican data, a set of systemic risk indexes are constructed and we show that...

Recent regulation mandating the clearing of credit default swaps (CDS) by a Central Clearing Counterparties (CCP), has rendered the latter a systemically important institution, whose failure poses a serious threat to global financial stability. This work investigates the potential failure of a...

Recently, for standard asset classes, the first mutual clearing agreements between Central Coun- terparties (CCPs) have come into existence. There are already global concerns over the unique threats and benefits which arise from these situations, and further concern for an extension of agree-...

Following the 2008 financial crisis, regulation mandates the clearing of the CDS market through Central Clearing Counter-parties (CCPs). Large CCPs are now designated as 'Global Systemically Important Institutions' (GSIIs), whose unlikely-but-plausible failure threatens global financial market...

This paper assesses the validity of comparisons of the current financial crisis with past crises in the United States. We highlight aspects of two National Banking Era crises (the Panic of 1873 and the Panic of 1907) that are relevant for comparison with the Panic of 2008. In 1873,...

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to uncertainty aversion, beliefs on future asset returns are endogenous, and bad news on one asset class induces investors to be more pessimistic about other asset classes as well. This...

CoCo’s (contingent convertible capital) are designed to convert from debt to equity when banks need it most. Using a Diamond-Dybvig model cast in a global games framework, we show that while the CoCo conversion of the issuing bank may bring the bank back into compliance with capital...

AbstractThe following sections are included:IntroductionThe Central Bank's Legitimacy When It Has a Financial Stability RoleThe political nature of the central bank's financial stability roleThe perceived legitimacy of the Eurosystem as provider of financial stabilityThe Eurosystem's output...