Systemic susceptibility highlights the extent to which a banking sector is sensitive to negative shocks. Policymakers and regulators' objective is to avoid financial crises, and even though they can somewhat control local conditions, internationally transmitted crises are difficult to tackle....

The rapid development of cryptocurrencies has drawn attention to this particular market, with investors trying to understand its behaviour and researchers trying to explain it. The evolution of cryptocurrencies' prices showed a kind of bubble and a crash at the end of 2017. Based on this event,...

The purpose of this study is to empirically analyze the contagion effects of the COVID-19 pandemic on stock returns of the Pakistan Stock Exchange (PSX). In this context, the causal changes of three major macroeconomic indicators i.e. gold prices, prices of real estate, and the US exchange rate...

Drawing from the experience of the global financial crisis that sprang forth from the US stock market, an empirical assessment of the dynamic correlation analysis of financial contagion with evidence from (5) African countries (South African, Nigeria, Egypt, Kenya, Tunisia) is presented. Monthly...

This paper explores the contagious propagation of jumps among international stock market indices by exploiting a rich panel of stock and options data. We propose a multivariate option pricing model designed to allow for, but not superimpose, time and space amplification of jumps in option...

The purpose of this study is to empirically analyze the contagion effects of the COVID-19 pandemic on stock returns of the Pakistan Stock Exchange (PSX). In this context, the causal changes of three major macroeconomic indicators i.e. gold prices, prices of real estate, and the US exchange rate...

We build a commercial credit network, identify the most central economic sectors in terms of commercial debt, and provide a more complete idea of total indebtedness and financial interlinks between firms and banks in Uruguay. "Commerce," "manufacturing," and "transportation, storage, and...

Payment systems are fundamental pillars of countries’ economic stability and financial systems. Central banks use them to promote safe and efficient electronic payments. As such, central banks have developed various tools to control and monitor inherent risks such as systemic risk, liquidity...

In this paper we present a methodology of model-based calibration of additional capital needed in an interconnected financial system to minimize potential contagion losses. Building on ideas from combinatorial optimization tailored to controlling contagion in case of complete information about...

The primary purpose of the study is to identify and measure the properties of asset bubbles, volatility clustering, and financial contagion during three recent financial market anomalies that originated in the U.S. and Chinese markets. In particular, we focus on the 2000 DotCom Bubble, the 2008...

Our paper studies the impacts of the Dieselgate scandal on the required rate of return on equity investments into VW, Daimler, and BMW. The object of investigation is the beta coefficient that determines the risk premium in the Capital Asset Pricing Model (CAPM). Our research takes a deep dive...

In this paper we present a new approach to analyse the interconnectedness between a macro-level network and a local-level network. Our methodology is developed on the Diebold and Yilmaz connectedness measure and it considers the presence of entities within a global network which can influence...

This paper investigates the relationship between the BRICs’ and the advanced economies’ stock markets from 2000 to 2016 utilizing continuous wavelet transform. The continuous wavelet transform allows us to explore these relationships in the time-frequency domain to capture short- and...

Using quarterly housing price-to-rent ratios from 1970 to 2020, this paper investigated the presence of real estate bubbles at a national level in six selected European countries, namely France, Germany, Italy, Netherlands, Spain, and the United Kingdom. We applied the generalized sup ADF test...

This paper examines the link between bank competition measures and risk indicators using quarterly interbank exposures data for all banks in Mexico during 2008Q1-2019Q1. The classical literature focuses on disentangling the link between competition and individual bank solvency risk. In this...

This paper provides new empirical evidence on housing bubble timing, volatility spillover, and bubble contagion between Japan and its economic partners, namely, the United States, the Eurozone, and the United Kingdom. First, we apply a generalized sup ADF (GSADF) test to the quarterly...

The recent financial crisis proved that financial contagion could spread among countries resulting in disruptive effects. In this paper, by modeling and simulating banking system behavior and linkages across countries, we assess, based on data from the BIS and IMF, the possible outcome of...

This paper studies the presence of the day-of-the-week (DOW) effect in the financial contagion process observed on individual economic sectors from the Post-Communist East European markets. The only markets that provide national-specific sector indices determined throughout the 2008 financial...

In the contemporary world bustling with global trade, a natural disaster or financial crisis in one country (or region) can cause substantial economic losses and turbulence in the local financial markets, which may then affect the economic activities and financial assets of other countries (or...

We examine how environmental violations affect the stock returns of the violating firm and how these financial implications then spread to industry peers. Volkswagen's diesel emissions scandal (Dieselgate) and the German automotive industry serve as a seminal case for the examination. Research...

This paper examines contagion effect on 10 African financial markets. These markets can be considered risky as they carry additional political and economic risks. They are also a lot less integrated with the US as depicted in financial integration literature. A consequence of this is that...

After the 2008 financial crisis, policymakers focused on enacting improvements in two areas of financial regulation: capital and liquidity, affecting the composition of bank assets and the sources of bank funding. These improvements made both the emergence of a crisis less likely and the...

We introduce threshold growth in the classical threshold contagion model, or equivalently a network of Cramer-Lundberg processes in which nodes have downward jumps when there is a failure of a neighboring node. Choosing the configuration model as underlying graph, we prove fluid limits for the...

Currently financial stress test simulations that take into account multiple interacting contagion mechanisms are conditional on a specific, subjectively imposed stress-scenario. Eigenvalue-based approaches, in contrast, provide a scenario-independent measure of systemic stability, but only...

This paper studies the diffusion of products and behaviour with coordination effects through social networks when agents are myopic best responders. We develop a new network measure, the contagion threshold, that determines when a p-dominant action – an action that is a best response when...

This paper examines the movement of cryptocurrencies' return based on price. This volatility can spread to others of the same kind. Currently, the more cryptocurrencies are traded in market, the more chances are available for investors. The author wonders whether contagion risk among these...

Using both market-wide and firm-level illiquidity measures of the stock, bond, and CDS markets, we find that the co-movements of illiquidity across markets increase significantly during the recent global financial crisis. Moreover, the degree of co-movements remains significantly higher in the...

I develop a simple contract-theoretic model of multi-stage economies to address the nexus between trade credit, bank credit and balance-sheet contagion. First, I show that competitive markets in which heterogeneous price-taker firms compete strategically by setting trade credit settlements have...

We propose a distress measure for national banking systems that incorporates not only banks' CDS spreads, but also how they interact with the rest of the global financial system via multiple linkage types. The measure is based on a tensor decomposition method that extracts an adjacency matrix...

We study default in a multi-firm equilibrium setting with incomplete information. Defaults are modeled to be consistent with the firm's balance sheet and aggregation over firms. Market prices and quantities of risk are derived in closed form. If the number of firms increases, the market prices...

This paper studies intertemporal asset pricing in network economies when distress shocks can propagate through the network, similarly to epidemic outbreaks. Two classes of equilibria exist. In the fi rst, idiosyncratic shocks are diversi fiable and do not affect investor asset valuations. The...

We develop a model for contagion risks and optimal security investment in a directed network of interconnected agents with heterogeneous degrees, loss functions and security profiles. Our model generalizes much of contagion models in the literature; in particular the independent cascade model and...

The past twelve years were punctuated by increasingly complex dynamics of the cross-market interdependence and two ``once-in-100-year'' global financial crises, including the 2020 financial contagion through increased physical contagion during the COVID-19 pandemic. This paper develops a...