Diversification and Systemic Risk: A Financial Network Perspective

Rüdiger Frey; Juraj Hledik

doi:10.3390/risks6020054

Diversification and Systemic Risk: A Financial Network Perspective

Rüdiger Frey, Juraj Hledik

Statistics and Mathematics

Publikation: Wissenschaftliche Fachzeitschrift › Originalbeitrag in Fachzeitschrift › Begutachtung

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Abstract

In this paper, we study the implications of diversification in the asset portfolios of banks for financial stability and systemic risk. Adding to the existing literature, we analyse this issue in a network model of the interbank market. We carry out a simulation study that determines the probability of a systemic crisis in the banking network as a function of both the level of diversification, and the connectivity and structure of the financial network. In contrast to earlier studies we find that diversification at the level of individual banks may be beneficial for financial stability even if it does lead to a higher asset return correlation across banks.

Keywords: systemic risk; financial network; diversification
JEL Classification: G21; G28

Originalsprache	Englisch
Seiten (von - bis)	54
Fachzeitschrift	Risks
Jahrgang	6
Ausgabenummer	2
DOIs	https://doi.org/10.3390/risks6020054
Publikationsstatus	Veröffentlicht - 2018

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

502009 Finanzwirtschaft
101024 Wahrscheinlichkeitstheorie
101007 Finanzmathematik

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10.3390/risks6020054Lizenz: Nicht angegeben

Risks-06-00054Endgültige, publizierte Fassung, 561 KBLizenz: CC BY

http://www.mdpi.com/2227-9091/6/2/54/htmLizenz: Nicht angegeben

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Katalog der Universitätsbibliothek

Stochastic Filtering and Corporate and Sovereign Credit Risk
Frey, R. (Projektleitung), Damian, C. (Forscher*in), Hirk, R. (Forscher*in), Hornik, K. (Forscher*in), Pichler, S. (Forscher*in) & Szölgyenyi, M. (Forscher*in)
1/04/15 → 31/03/20
Projekt: Forschungsförderung

Zitat

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Diversification and Systemic Risk: A Financial Network Perspective

Abstract

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

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Projekte

Stochastic Filtering and Corporate and Sovereign Credit Risk

Zitat