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Let a small bank fail : implicit nonguarantee and financial contagion

Liu, Liyuan; Wang, Xianshuang; Zhou, Zhen - 2024

This paper examines the consequences of Chinese regulators deviating from a long-standing full bailout policy in addressing the distress of a city-level commercial bank. This policy shift led to a persistent widening of credit spreads and a significant decline in funding ratios for negotiable...

Persistent link: https://www.econbiz.de/10015079903

Financial Contagion

Allen, Franklin; Gale, Douglas - 2011

Financial contagion is modeled as an equilibrium phenomenon. Because liquidity preference shocks are imperfectly … correlated across regions, banks hold interregional claims on other banks to provide insurance against liquidity preference … arrangement is financially fragile. A small liquidity preference shock in one region can spread by contagion throughout the …

Persistent link: https://www.econbiz.de/10014041239

Sovereign Debt in an Economic Union : A Model of Bailouts and Contagion

Perazzi, Elena - 2016

We propose a model to account for two stylized facts about sovereign yields in the Euro Area: their convergence after 2000 and subsequent divergence after 2008, and the contagion among yields of the Euro periphery after the financial crisis of 2007-2008.Two borrowing countries share a bailout...

Persistent link: https://www.econbiz.de/10013005610

European Government Bond Dynamics and Stability Policies : Taming Contagion Risks

Schwendner, Peter - 2017

From 2004 to 2015, the market perception of the sovereign risks of the Euro area government bonds experienced several different phases, reflected in a clear time structure of the correlation matrix between the yield changes. "Core" and "peripheral" bonds cluster in a bloc-like structure, but the...

Persistent link: https://www.econbiz.de/10012971807

Diversification vs. Contagion in Inter-Linked Portfolios

Meyricke, Ramona - 2013

Inter-linkages between firms are a channel by which idiosyncratic shocks to one firm can affect the returns of linked counterparties. We extend a factor model of returns to allow for the transmission of idiosyncratic shocks between linked counterparties. We show that the structure of...

Persistent link: https://www.econbiz.de/10013092524

European Government Bond Dynamics and Stability Policies : Taming Contagion Risks

Schwendner, Peter - 2018

From 2004 to 2015, the market perception of the sovereign risks of the euro area government bonds experienced several different phases, reflected in a clear time structure of the correlation matrix between the yield changes. “Core” and “peripheral” bonds cluster in a bloc-like structure,...

Persistent link: https://www.econbiz.de/10012924391

Contagion from market price impact : a price-at-risk perspective

Fukker, Gábor; Kaijser, Michiel; Mingarelli, Luca; … - 2022

Overlapping portfolios constitute a well-recognised source of risk, providing a channel for financial contagion induced by the market price impact of asset deleveraging. We introduce a novel method to assess the market price impact on a security-by-security basis from historical daily traded...

Persistent link: https://www.econbiz.de/10013329388

Banks, markets, and financial stability

Eder, Armin; Fecht, Falko; Pausch, Thilo - 2014

-in-the-market pricing and a no-arbitrage condition. We find that (i) a higher crisis probability increases the liquidity premium and thus …

Persistent link: https://www.econbiz.de/10010433396

Financial Entanglement : A Theory of Incomplete Integration, Leverage, Crashes, and Contagion

Garleanu, Nicolae - 2015

We propose a unified model of limited market integration, asset-price determination, leveraging, and contagion. Investors and firms are located on a circle, and access to markets involves participation costs that increase with distance. Due to a complementarity between participation and leverage...

Persistent link: https://www.econbiz.de/10013035192

Crisis Date Identification and Testing for Contagion across Stock Markets

Adesanya, Oladunni - 2020

This paper studies whether the choice of the crisis start dates affects the magnitude of contagion estimates. Contagion models generally use exogenously determined crisis start date by relying on event-based markers. We conduct structural break tests and endogenously determine the start dates of...

Persistent link: https://www.econbiz.de/10012832244