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Measuring Systemic Risk Across Financial Market Infrastructures

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  • Fuchun Li
  • Héctor Pérez Saiz

Abstract

We measure systemic risk in the network of financial market infrastructures (FMIs) as the probability that two or more FMIs have a large credit risk exposure to the same FMI participant. We construct indicators of credit risk exposures in three main Canadian FMIs during the period 2007–11 and use extreme value methods to estimate this probability. We find large differences in the contribution to systemic risk across participants. We also find that when participants are in financial distress, they tend to create large credit exposures in two or more FMIs. Our results suggest that an appropriate oversight of FMIs may benefit from an in-depth system-wide analysis, which may have useful implications for the macroprudential regulation of the financial system.

Suggested Citation

  • Fuchun Li & Héctor Pérez Saiz, 2016. "Measuring Systemic Risk Across Financial Market Infrastructures," Staff Working Papers 16-10, Bank of Canada.
    • Handle: RePEc:bca:bocawp:16-10
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    More about this item

    Keywords

    Econometric and statistical methods; Financial stability; Payment clearing and settlement systems;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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