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Crossborder financial contagion to Germany: How important are OTC dealers?

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  • Podlich, Natalia
  • Wedow, Michael

Abstract

We examine crossborder contagion from a number of financial systems to the German financial system using the information content of CDS prices in a GARCH model. After controlling for common factors which may cause comovement in security prices, we find evidence for contagion from the US and European financial systems. Assessing contagion for dealer and non-dealer banks suggests that contagion from dealer banks is the most prominent source of contagion to the German financial system. While German non-dealer banks are affected both by European and US dealers, only US dealer banks have a contagion effect to German dealer banks.

Suggested Citation

  • Podlich, Natalia & Wedow, Michael, 2014. "Crossborder financial contagion to Germany: How important are OTC dealers?," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 1-9.
    • Handle: RePEc:eee:finana:v:33:y:2014:i:c:p:1-9
    DOI: 10.1016/j.irfa.2013.07.008
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    Cited by:

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    2. Joseph, Andreas & Vasios, Michalis & Maizels, Olga & Shreyas, Ujwal & Tanner, John, 2019. "OTC microstructure in a period of stress: a multi‑layered network approach," Bank of England working papers 832, Bank of England.
    3. Franch, Fabio & Nocciola, Luca & Vouldis, Angelos, 2024. "Temporal networks and financial contagion," Journal of Financial Stability, Elsevier, vol. 71(C).
    4. Abbassi, Puriya & Brownlees, Christian & Hans, Christina & Podlich, Natalia, 2017. "Credit risk interconnectedness: What does the market really know?," Journal of Financial Stability, Elsevier, vol. 29(C), pages 1-12.

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    More about this item

    Keywords

    Systemic risk; CDS spreads; Contagion; OTC dealer;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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