Interconnectedness and systemic risk network of Chinese financial institutions: A LASSO-CoVaR approach

Xu, Qifa; Li, Mengting; Jiang, Cuixia; You, He

doi:10.1016/j.physa.2019.122173

Cited by 50 publications

(11 citation statements)

References 46 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Our findings suggested the existence of contagion not only from large cap institutions, but also from small cap institutions that acted in a herding manner during crisis periods. Xu et al (2019) showed that the financial system interconnectedness level peaked during market downturns and could not be ignored in estimating the systemic risk of individual institutions.…”

Section: Resultsmentioning

confidence: 99%

The Leaders, the Laggers, and the “Vulnerables”

Arakelian

Hashem

2020

Risks

View full text Add to dashboard Cite

We examine the lead-lag effect between the large and the small capitalization financial institutions by constructing two global weekly rebalanced indices. We focus on the 10% of stocks that “survived” all the rebalancings by remaining constituents of the indices. We sort them according to their systemic importance using the marginal expected shortfall (MES), which measures the individual institutions’ vulnerability over the market, the network based MES, which captures the vulnerability of the risks generated by institutions’ interrelations, and the Bayesian network based MES, which takes into account different network structures among institutions’ interrelations. We also check if the lead-lag effect holds in terms of systemic risk implying systemic risk transmission from the large to the small capitalization, concluding a mixed behavior compared to the index returns. Additionally, we find that all the systemic risk indicators increase their magnitude during the financial crisis.

show abstract

Section: Resultsmentioning

confidence: 99%

The Leaders, the Laggers, and the “Vulnerables”

Arakelian

Hashem

2020

Risks

View full text Add to dashboard Cite

show abstract

“…There are three major estimation models for CoVaR: quantile regression, DCC-GARCH model, and Copula model (Drakos and Kouretas, 2015; Bernardi et al , 2017; Trabelsi et al , 2017). Xu (2019) and Li (2019) uses LASSO-CoVAR and DCC-GARCH-CoVAR to investigate the risk spillover channels and the firm-level driving factors of the systemic risk in the Chinese banking sector, separately. On the other hand, Ji (2018) and Sun et al (2020) use Copula-CoVAR to assess the systemic risk in the commodities markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Interconnectedness and systemic risk measures of Chinese financial institutions

Zhang

Xiao

et al. 2021

View full text Add to dashboard Cite

PurposeIn this paper the interconnectedness among financial institutions and the level of systemic risks of four types of Chinese financial institutions are investigated.Design/methodology/approachBy the means of RAS algorithm, the interconnection among financial institutions are illustrated. Different methods, including Linear Granger, Systemic impact index (SII), vulnerability index (VI), CoVaR, and MES are used to measure the systemic risk exposures across different institutions.FindingsThe results illustrate that big banks are more interconnected and hold the biggest scales of inter-bank transactions in the financial network. The institutions which have larger size tend to have more connection with others. Insurance and security companies contribute more to the systemic risk where as other institutions, such as trusts, financial companies, etc. may bring about severe loss and endanger the financial system as a whole.Practical implicationsSince other institutions with low levels of regulation may bring about higher extreme loss and suffer the whole system, it deserves more attention by regulators considering the contagion of potential risks in the financial system.Originality/valueThis study builds a valuable contribution by examine the systemic risks from the perspectives of both interconnection and tail risk measures. Furthermore; Four types financial institutions are investigated in this paper.

show abstract

“…By means of the hyperlink-induced topic search algorithm (HITS), Gao et al [35] analyzed the level of China bank's systemic risk. Xu et al [36] developed the LASSO-CoVaR approach (the least absolute shrinkage and selection operator method into the CoVaR estimation) to measure the systemic risk of Chinese financial institutions and contagion channels from the perspective of network. Results showed the network interconnectedness increased significantly during the stock market crash and the contagion risk cannot be ignored.…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of China Commercial Banks’ Systemic Risk Sustainability through the Leave-One-Out Approach

2019

View full text Add to dashboard Cite

One of the main issues in the recent Chinese financial reform is aimed at effectively measuring systemic risk and taking appropriate measures to ensure its sustainability and prevent new crises. In this paper, we firstly introduced the present macro-prudential policies implied in China and pointed out the existing problems. Secondly, we analyzed the banks’ assets riskiness and the banks’ probability to default, then, by means of a leave-one-out model, we measured each commercial bank systemic risk contribution. Thirdly, based on comprehensive empirical results and theoretical analysis, we provided some references for macro-prudential regulation and supervision. Results show that systemic risk is increasing in 2013–2017, in particular with reference to contagion risk, with a specific concentration within joint-stock commercial banks, suggesting a specific attention of regulators and supervisors for this category.

show abstract

Interconnectedness and systemic risk network of Chinese financial institutions: A LASSO-CoVaR approach

Cited by 50 publications

References 46 publications

The Leaders, the Laggers, and the “Vulnerables”

The Leaders, the Laggers, and the “Vulnerables”

Interconnectedness and systemic risk measures of Chinese financial institutions

Analysis of China Commercial Banks’ Systemic Risk Sustainability through the Leave-One-Out Approach

Contact Info

Product

Resources

About