Imperial College London
Alternate

ProfessorRamaCont

Faculty of Natural Sciences, Department of Mathematics

Visiting Professor
 
 
 
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Contact

 

+44 (0)20 7594 0802r.cont Website

 
 
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Location

 

806Weeks BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Cont:2019:10.1016/j.jbankfin.2019.04.007,
author = {Cont, R and Schaanning, E},
doi = {10.1016/j.jbankfin.2019.04.007},
journal = {Journal of Banking & Finance},
pages = {85--102},
title = {Monitoring indirect contagion},
url = {http://dx.doi.org/10.1016/j.jbankfin.2019.04.007},
volume = {104},
year = {2019}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We propose two indicators for quantifying the potential exposure of financial institutions to indirect contagion arising from deleveraging of assets in stress scenarios. The first indicator, the Endogenous Risk Index (ERI) captures spillovers across portfolios arising from deleveraging in stress scenarios. The second indicator, the Indirect Contagion Index (ICI) measures the systemic importance of a bank by quantifying the loss its distressed liquidation would inflict on other institutions. Both are computable from portfolio holdings of financial institutions and measures of market depth for the assets held in the portfolio. We discuss the micro-foundation of these indicators and apply them to the analysis of the vulnerability of the European banking system to indirect contagion.Using data on portfolio holdings of European banks, we show that our indicators correlate to the magnitude of fire-sales losses in simulated stress scenarios, thus providing a simple to compute proxy for the outcome of stress tests. We also show that the information provided by our indicators on the systemic importance of banks is different from indicators based on size, thereby providing a measure of interconnectedness complementary to those currently used by supervisors.
AU  - Cont,R
AU  - Schaanning,E
DO  - 10.1016/j.jbankfin.2019.04.007
EP  - 102
PY  - 2019///
SN  - 0378-4266
SP  - 85
TI  - Monitoring indirect contagion
T2  - Journal of Banking & Finance
UR  - http://dx.doi.org/10.1016/j.jbankfin.2019.04.007
UR  - https://www.sciencedirect.com/science/article/pii/S0378426619300974?via%3Dihub
VL  - 104
ER  -
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