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Monica Billio, Venezia Print
Thursday, 17 November 2011, 12:15 - 13:15

Monica Billio, Università Ca' Foscari di Venezia

Econometric Measures of Systemic Risk in the Finance and Insurance Sectors

Abstract: We propose several econometric measures of systemic risk to capture the interconnectedness
among the monthly returns of hedge funds, banks, brokers, and insurance companies based
on principal components analysis and Granger-causality tests. We find that all four sectors
have become highly interrelated over the past decade, increasing the level of systemic risk
in the finance and insurance industries. These measures can also identify and quantify
financial crisis periods, and seem to contain predictive power for the current financial crisis.
Our results suggest that hedge funds can provide early indications of market dislocation,
and systemic risk arises from a complex and dynamic network of relationships among hedge
funds, banks, insurance companies, and brokers.

Location: R42.2.113
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it