The kiss of information theory that captures systemic riskReport as inadecuate

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* Corresponding author 1 CES - Centre d-économie de la Sorbonne 2 NEOMA - Neoma Business School 3 Potsdam Institute for Climate Research, Potsdam, Germany 4 Department of Physics

Abstract : We provide a new approach to understanding systemic risk by analysing complex linkages in finance and insurance sectors. The analysis is achieved by using a recently proposed method for quantifying causal coupling strength, which identifies the existence of causal dependencies between two components of a multivariate time series and assesses the strength of their association by defining a meaningful coupling strength. The measure of association is general, causal and lag-specific, reflecting a well interpretable notion of coupling strength and is pratically computable. A comprehensive analysis of the feasibility of this approach is provided via simulated and real data.

Keywords : systemic risk causal dependencies financial institutions linkages Sovereign debt

Author: Peter Martey Addo - Philippe De Peretti - Hayette Gatfaoui - Jakob Runge -



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