Sovereign, Bank, and Insurance Credit Spreads: Connectedness and System Networks - Monica Billio - June 25 2013 - First International Conference on Syrto Project
Independent Call Girl Number in Kurla Mumbai📲 Pooja Nehwal 9892124323 💞 Full ...
Sovereign, Bank, and Insurance Credit Spreads: Connectedness and System Networks - Monica Billio - June 25 2013
1. Sovereign, Bank, and
Insurance Credit
Spreads: Connectedness
and System Networks
SYstemic Risk TOmography:
Signals, Measurements, Transmission Channels,
and Policy Interventions
Monica Billio (Ca’ Foscari University of Venice), Mila Getmansky
(University of Massachusetts), Dale Gray (IMF), Andrew W. Lo (MIT &
AlphaSimplex Group, Cambridge), Robert C. Merton (MIT) and Loriana
Pelizzon (Ca’ Foscari University of Venice)
Brescia, 25 June 2013
13. Linear Granger Causality Tests
ELRk (t) = ak + bk ELRk(t‐1) + bjk ELRj(t‐1) + Ɛt
ELRj(t) = aj + bj ELRj(t‐1) + bkj ELRk(t‐1) + ζt
• If bjk is significantly > 0, then j influences k
• If bkj is significantly > 0, then k influences j
• If both are significantly > 0, then there is
feedback, mutual influence, between j and
k.
13
14. Data
• Sample: Jan 01‐Mar12
• Monthly frequency
• Entities:
– 17 Sovereigns (10 EMU, 4 EU, CH, US, JA)
– 63 Banks (34EMU, 11EU, 2CH, 12US, 4JA)
– 39 Insurance Companies (9EMU, 6EU, 16US,
2CH, 5CA)
• CCA ‐ Moody’s KMV CreditEdge:
– Expected Loss (EL)
17. Network Measures
• Degrees
• Connectivity
• Centrality
•Indegree (IN): number of incoming connections
•Outdegree (FROM): number of outgoing
connections
•Totdegree: Indegree + Outdegree
•Number of node connected: Number
of nodes reachable following the
directed path
•Average Shortest Path: The average
number of steps required to reach the
connected nodes
•Eigenvector Centrality (EC): The more the
node is connected to central nodes (nodes
with high EC) the more is central (higher
EC)
37. 37
Assets = Equity + Risky Debt
= Equity + Default‐Free Debt – Expected Loss Value
Assets
Equity
or Jr
Claims
Risky
Debt
• Value of liabilities
derived from value of
assets.
• Liabilities have
different seniority.
• Randomness in
asset value.
Core Concept of CCA:
Merton Model
38. This project is funded by
the European Union under the
7th Framework Programme (FP7-SSH/2007-2013)
Grant Agreement n°320270
!
!
!
!
!
!
!
www.syrtoproject.eu
This document reflects only the author’s views. The European Union is not liable for any use that may be made of the information contained therein.