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Measuring Exposure of European Banking to the GIIPS Banking Sector
Lund University, Lund, Sweden. (Nationalekonomi)
Örebro University, Örebro University School of Business. (Statistik)ORCID iD: 0000-0002-1488-4703
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper attempts at evaluating the systemic risk contributions of GIIPS-block

(Greece, Ireland, Italy, Portugal, and Spain) banks on the rest of major European

countries' banking systems. To quantify systemic risk, a Conditional Value-at-Risk

(CoVaR) approach has been employed. In order to empirically calculate the magnitude

of risk, CoVaR measure is further evaluated by quantile regression and Dynamic

Conditional Correlation (DCC). Our results firstly indicate a significant spillover effect

of GIIPS banking on the examined banking systems. Second, larger systemic

risk is evident during the recent financial crisis. This period is highly volatile and

European banking indices have higher correlations with GIIPS banking index. A

robustness analysis is made between the two estimated CoVaR measures and a simple

non-conditional VaR measure. Finally, the Guntay-Kupiec test is employed to

distinguish between systemic risk and systematic risk. Our findings indicate that

the non-parametric method, such as quantile regression, yields larger CoVaR values

than the parametric method based on the Gaussian distribution.

Keyword [en]
Systemic Risk, CoVaR, VaR, Quantile Regression, DCC, Correlation
National Category
Economics
Research subject
Economics; Statistics
Identifiers
URN: urn:nbn:se:oru:diva-57936OAI: oai:DiVA.org:oru-57936DiVA: diva2:1106341
Available from: 2017-06-07 Created: 2017-06-07 Last updated: 2017-06-20

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
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More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf