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Systemic Risk: a Network Approach

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  • Jean-Baptiste Hasse

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We propose a new measure of systemic risk based on interconnectedness, defined as the level of direct and indirect links between financial institutions in a correlation-based network. Deriving interconnectedness in terms of risk, we empirically show that within a financial network, indirect links are strengthened during systemic events. The relevance of our measure is illustrated at both local and global levels. Our framework offers policymakers a useful toolbox for exploring the real-time topology of the complex structure of dependencies in financial systems and for measuring the consequences of regulatory decisions.

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  • Jean-Baptiste Hasse, 2020. "Systemic Risk: a Network Approach," Working Papers halshs-02893780, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02893780
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02893780
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    References listed on IDEAS

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    1. Jean-Baptiste Hasse, 2022. "Systemic risk: a network approach," Empirical Economics, Springer, vol. 63(1), pages 313-344, July.

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    Keywords

    Financial networks; Interconnectedness; Systemic risk; Spillover;
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