2014/11/05 by Raffaella Calabrese, Calabrese, Raffaella, Silvia Angela Osmetti +1
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Financial Risk and Volatility Modeling #Monetary Policy and Economic Impact
paper · pdf · doi:10.48550/arxiv.1411.1348
We propose a new methodology based on the Marshall-Olkin (MO) copula to model\ncross-border systemic risk. The proposed framework estimates the impact of the\nsystematic and idiosyncratic components on systemic risk. Initially, we propose\na maximum-likelihood method to estimate the parameter of the MO copula. In\norder to use the data on non-distressed banks for these estimates, we consider\ntimes to bank failures as censored samples. Hence, we propose an estimation\nprocedure for the MO copula on censored data. The empirical evidence from\nEuropean banks shows that the proposed censored model avoid possible\nunderestimation of the contagion risk.\n