The latest financial crisis has stressed the need of understanding the world financial system as a network of interconnected institutions, where financial linkages play a fundamental role in the spread of systemic risks. In this paper we propose to enrich the topological perspective of network...

This paper extends the extreme downside correlation (EDC) and extreme downside hedge (EDH) methodology to model the interdependence in the sensitivity of assets to the downside risk of other financial assets under severe firm-level and market conditions. The model is applied to analyze both...