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An Equilibrium-Based Measure of Systemic Risk

Author

Listed:
  • Katerina Ivanov

    (McColl School of Business, Queens University of Charlotte, Charlotte, NC 28274, USA)

  • James Schulte

    (Department of Economics, Florida State University, Tallahassee, FL 32306, USA)

  • Weidong Tian

    (Belk College of Business, University of North Carolina at Charlotte, Charlotte, NC 28223, USA)

  • Kevin Tseng

    (College of Management, National Taiwan University, Taipei 10617, Taiwan)

Abstract

This paper develops and implements an equilibrium model of systemic risk. The model derives a systemic risk measure, loss beta, in characterizing all too-big-to-fail banks using a capital insurance equilibrium. By constructing each bank’s loss portfolio with a recent accounting approach, we perform a comprehensive empirical study of this loss beta measure and document all TBTF banks from 2002 to 2019. Our empirical findings suggest a significant number of too-big-to-fail banks in 2018–2019.

Suggested Citation

  • Katerina Ivanov & James Schulte & Weidong Tian & Kevin Tseng, 2021. "An Equilibrium-Based Measure of Systemic Risk," JRFM, MDPI, vol. 14(9), pages 1-24, September.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:9:p:414-:d:627481
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    References listed on IDEAS

    as
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