Cohen-Cole, Ethan; Patacchini, Eleonora; Zenou, Yves - Nationalekonomiska institutionen, Stockholms Universitet - 2011
We propose a novel mechanism to facilitate understanding of systemic risk in financial markets. The literature on … systemic risk has focused on two mechanisms, common shocks and domino-like sequential default. Our approach is a formal model … to bring the model to the data. Indeed, our measures of systemic risk capture the propagation of shocks in a wide variety …