TY - JOUR
T1 - Forecasting systemic impact in financial networks
AU - Hautsch, N.
AU - Schaumburg, J.
AU - Schienle, M.
PY - 2014
Y1 - 2014
N2 - We propose a methodology for forecasting the systemic impact of financial institutions in interconnected systems. Utilizing a five-year sample including the 2008/9 financial crisis, we demonstrate how the approach can be used for the timely systemic risk monitoring of large European banks and insurance companies. We predict firms' systemic relevance as the marginal impact of individual downside risks on systemic distress. So-called systemic risk betas account for a company's position within the network of financial interdependencies, in addition to its balance sheet characteristics and its exposure to general market conditions. Relying only on publicly available daily market data, we determine time-varying systemic risk networks, and forecast the systemic relevance on a quarterly basis. Our empirical findings reveal time-varying risk channels and firms' specific roles as risk transmitters and/or risk recipients. © 2013 International Institute of Forecasters.
AB - We propose a methodology for forecasting the systemic impact of financial institutions in interconnected systems. Utilizing a five-year sample including the 2008/9 financial crisis, we demonstrate how the approach can be used for the timely systemic risk monitoring of large European banks and insurance companies. We predict firms' systemic relevance as the marginal impact of individual downside risks on systemic distress. So-called systemic risk betas account for a company's position within the network of financial interdependencies, in addition to its balance sheet characteristics and its exposure to general market conditions. Relying only on publicly available daily market data, we determine time-varying systemic risk networks, and forecast the systemic relevance on a quarterly basis. Our empirical findings reveal time-varying risk channels and firms' specific roles as risk transmitters and/or risk recipients. © 2013 International Institute of Forecasters.
U2 - 10.1016/j.ijforecast.2013.09.004
DO - 10.1016/j.ijforecast.2013.09.004
M3 - Article
SN - 0169-2070
VL - 30
SP - 781
EP - 794
JO - International Journal of Forecasting
JF - International Journal of Forecasting
IS - 3
ER -