| By: |
Nikolaus Hautsch;
Julia Schaumburg;
Melanie Schienle;
|
| Abstract: |
We propose a methodology for forecasting the systemic impact of financial
institutions in interconnected systems. Utilizing a five-year sample including
the 2008/9 financial crisis, we demonstrate how the approach can be used for
timely systemic risk monitoring of large European banks and insurance
companies. We predict firms’ systemic relevance as the marginal impact of
individual downside risks on systemic distress. The so-called systemic risk
betas account for a company’s position within the network of financial
interdependencies in addition to its balance sheet characteristics and its
exposure towards general market conditions. Relying only on publicly available
daily market data, we determine time-varying systemic risk networks, and
forecast systemic relevance on a quarterly basis. Our empirical findings
reveal time-varying risk channels and firms’ specific roles as risk
transmitters and/or risk recipients. |
| Keywords: |
Forecasting systemic risk contributions, time-varying systemic risk network, model selection with regularization in quantiles |
| JEL: |
G01 G18 G32 G38 C21 C51 C63 |
| Date: |
2013–01 |
| URL: |
http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2013-008&r=cfn |