Extreme spillover between shadow banking and regular banking
Type
working paper
Date Issued
2013
Author(s)
Abstract
The current financial crisis brought light to a large banking sector that existed for decades within the "darkness" of the financial system - the shadow banking sector. Shadow bank assets are widely traded in the financial markets and shadow banking activities are intertwined with the daily business of regular banks. This unregulated banking sector has become systematically important. Its failure affected the entire banking system. We present a model based on multivariate extreme value theory, which allows us to measure crashes and liquidity squeezes. Using the stable tail dependence structure, we measure the interdependency between the tail probabilities of the regular banking sector and the shadow banking sector. This allows us to calculate the conditional spillover likelihood between asset returns and liquidity spreads for selected crash levels. The empirical results indicate a fairly strong contagion probability between shadow bank assets and regular bank assets.
Language
English
HSG Classification
contribution to practical use / society
Refereed
No
Publisher
Working Papers on Finance No. 2013/12, University of St. Gallen, School of Finance.
Subject(s)
Eprints ID
225266
File(s)![Thumbnail Image]()
Name
manuscript_Paraschiv_Qin.pdf
Size
1.35 MB
Format
Adobe PDF
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