Modelling the link between the global macro-financial factors and firms’ default probabilities constitutes an elementary part of financial sector stress-testing frameworks. Using the Global Vector Autoregressive (GVAR) model and constructing a linking satellite equation for the firm-level...

Systemic importance of a financial institution is measured as the additional tail loss induced into the system when the financial institution falls into distress due to its own structural shocks. The use of a structural approach is a step towards addressing a key concern in systemic risk...