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1 – 10 of over 1000Jaewon Choi and Jieun Lee
The authors estimate systemic risk in the Korean economy using the econometric measures of commonality and connectedness applied to stock returns. To assess potential systemic risk…
Abstract
The authors estimate systemic risk in the Korean economy using the econometric measures of commonality and connectedness applied to stock returns. To assess potential systemic risk concerns arising from the high concentration of the economy in large business groups and a few export-oriented sectors, the authors perform three levels of estimation using individual stocks, business groups, and industry returns. The results show that the measures perform well over the study’s sample period by indicating heightened levels of commonality and interconnectedness during crisis periods. In out-of-sample tests, the measures can predict future losses in the stock market during the crises. The authors also provide the recent readings of their measures at the market, chaebol, and industry levels. Although the measures indicate systemic risk is not a major concern in Korea, as they tend to be at the lowest level since 1998, there is an increasing trend in commonality and connectedness since 2017. Samsung and SK exhibit increasing degrees of commonality and connectedness, perhaps because of their heavy dependence on a few major member firms. Commonality in the finance industry has not subsided since the financial crisis, suggesting that systemic risk is still a concern in the banking sector.
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Ming Qi, Jiawei Zhang, Jing Xiao, Pei Wang, Danyang Shi and Amuji Bridget Nnenna
In this paper the interconnectedness among financial institutions and the level of systemic risks of four types of Chinese financial institutions are investigated.
Abstract
Purpose
In this paper the interconnectedness among financial institutions and the level of systemic risks of four types of Chinese financial institutions are investigated.
Design/methodology/approach
By the means of RAS algorithm, the interconnection among financial institutions are illustrated. Different methods, including Linear Granger, Systemic impact index (SII), vulnerability index (VI), CoVaR, and MES are used to measure the systemic risk exposures across different institutions.
Findings
The results illustrate that big banks are more interconnected and hold the biggest scales of inter-bank transactions in the financial network. The institutions which have larger size tend to have more connection with others. Insurance and security companies contribute more to the systemic risk where as other institutions, such as trusts, financial companies, etc. may bring about severe loss and endanger the financial system as a whole.
Practical implications
Since other institutions with low levels of regulation may bring about higher extreme loss and suffer the whole system, it deserves more attention by regulators considering the contagion of potential risks in the financial system.
Originality/value
This study builds a valuable contribution by examine the systemic risks from the perspectives of both interconnection and tail risk measures. Furthermore; Four types financial institutions are investigated in this paper.
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Annisa Triyanti, Gusti Ayu Ketut Surtiari, Jonatan Lassa, Irina Rafliana, Nuraini Rahma Hanifa, Mohamad Isnaeni Muhidin and Riyanti Djalante
This paper aims to identify key factors for a contextualised Systemic Risk Governance (SRG) framework and subsequently explore how systemic risks can be managed and how local…
Abstract
Purpose
This paper aims to identify key factors for a contextualised Systemic Risk Governance (SRG) framework and subsequently explore how systemic risks can be managed and how local institutional mechanisms can be tweaked to deal with the complex Indonesian risk landscape.
Design/methodology/approach
Using a case study from Palu triple-disasters in Central Sulawesi, Indonesia, the authors demonstrate how inland earthquakes in 2018 created cascading secondary hazards, namely tsunamis, liquefactions and landslides, caused unprecedented disasters for the communities and the nation. A qualitative analysis was conducted using the data collected through a long-term observation since 2002.
Findings
The authors argue that Indonesia has yet to incorporate an SRG approach in its responses to the Palu triple-disasters. Political will is required to adopt more appropriate risk governance modes that promote the systemic risk paradigm. Change needs to occur incrementally through hybrid governance arrangements ranging from formal/informal methods to self- and horizontal and vertical modes of governance deemed more realistic and feasible. The authors recommend that this be done by focusing on productive transition and local transformation.
Originality/value
There is growing awareness and recognition of the importance of systemic and cascading risks in disaster risk studies. However, there are still gaps between research, policy and practice. The current progress of disaster risk governance is not sufficient to achieve the Sendai Framework for Disaster Risk Reduction (2015–2030) unless there is an effective governing system in place at the local level that allow actors and institutions to simultaneously manage the interplays of multi-hazards, multi-temporal, multi-dimensions of vulnerabilities and residual risks. This paper contributes to these knowledge gaps.
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Anne-Sophie Gousse-Lessard, Philippe Gachon, Lily Lessard, Valérie Vermeulen, Maxime Boivin, Danielle Maltais, Elsa Landaverde, Mélissa Généreux, Bernard Motulsky and Julien Le Beller
The current pandemic and ongoing climate risks highlight the limited capacity of various systems, including health and social ones, to respond to population-scale and long-term…
Abstract
Purpose
The current pandemic and ongoing climate risks highlight the limited capacity of various systems, including health and social ones, to respond to population-scale and long-term threats. Practices to reduce the impacts on the health and well-being of populations must evolve from a reactive mode to preventive, proactive and concerted actions beginning at individual and community levels. Experiences and lessons learned from the pandemic will help to better prevent and reduce the psychosocial impacts of floods, or other hydroclimatic risks, in a climate change context.
Design/methodology/approach
The present paper first describes the complexity and the challenges associated with climate change and systemic risks. It also presents some systemic frameworks of mental health determinants, and provides an overview of the different types of psychosocial impacts of disasters. Through various Quebec case studies and using lessons learned from past and recent flood-related events, recommendations are made on how to better integrate individual and community factors in disaster response.
Findings
Results highlight the fact that people who have been affected by the events are significantly more likely to have mental health problems than those not exposed to flooding. They further demonstrate the adverse and long-term effects of floods on psychological health, notably stemming from indirect stressors at the community and institutional levels. Different strategies are proposed from individual-centered to systemic approaches, in putting forward the advantages from intersectoral and multirisk researches and interventions.
Originality/value
The establishment of an intersectoral flood network, namely the InterSectoral Flood Network of Québec (RIISQ), is presented as an interesting avenue to foster interdisciplinary collaboration and a systemic view of flood risks. Intersectoral work is proving to be a major issue in the management of systemic risks, and should concern communities, health and mental health professionals, and the various levels of governance. As climate change is called upon to lead to more and more systemic risks, close collaboration between all the areas concerned with the management of the factors of vulnerability and exposure of populations will be necessary to respond effectively to damages and impacts (direct and indirect) linked to new meteorological and compound hazards. This means as well to better integrate the communication managers into the risk management team.
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Rick van de Ven, Shaunak Dabadghao and Arun Chockalingam
The credit ratings issued by the Big 3 ratings agencies are inaccurate and slow to respond to market changes. This paper aims to develop a rigorous, transparent and robust credit…
Abstract
Purpose
The credit ratings issued by the Big 3 ratings agencies are inaccurate and slow to respond to market changes. This paper aims to develop a rigorous, transparent and robust credit assessment and rating scheme for sovereigns.
Design/methodology/approach
This paper develops a regression-based model using credit default swap (CDS) data, and data on financial and macroeconomic variables to estimate sovereign CDS spreads. Using these spreads, the default probabilities of sovereigns can be estimated. The new ratings scheme is then used in conjunction with these default probabilities to assign credit ratings to sovereigns.
Findings
The developed model accurately estimates CDS spreads (based on RMSE values). Credit ratings issued retrospectively using the new scheme reflect reality better.
Research limitations/implications
This paper reveals that both macroeconomic and financial factors affect both systemic and idiosyncratic risks for sovereigns.
Practical implications
The developed credit assessment and ratings scheme can be used to evaluate the creditworthiness of sovereigns and subsequently assign robust credit ratings.
Social implications
The transparency and rigor of the new scheme will result in better and trustworthy indications of a sovereign’s financial health. Investors and monetary authorities can make better informed decisions. The episodes that occurred during the debt crisis could be avoided.
Originality/value
This paper uses both financial and macroeconomic data to estimate CDS spreads and demonstrates that both financial and macroeconomic factors affect sovereign systemic and idiosyncratic risk. The proposed credit assessment and ratings schemes could supplement or potentially replace the credit ratings issued by the Big 3 ratings agencies.
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Ming Qi, Danyang Shi, Shaoyi Feng, Pei Wang and Amuji Bridget Nnenna
In this paper, the authors use the balance sheet data to investigate the interconnectedness and risk contagion effects in China's banking sector. They firstly study the network…
Abstract
Purpose
In this paper, the authors use the balance sheet data to investigate the interconnectedness and risk contagion effects in China's banking sector. They firstly study the network structure and centrality of the interbank network. Then, they investigate how and to what extent the credit shock and liquidity shock can lead to the risk propagation in the banking network.
Design/methodology/approach
Referring to the theoretical framework by Haldane and May (2011), this paper uses the network topology theory to analyze the contagion mechanism of credit shock and liquidity shock. Centrality measures and log-log plot are used to evaluate the interconnectedness of China's banking network.
Findings
The network topology has shown clustering effects of large banks in China's financial network. If the Industrial and Commercial Bank of China (ICBC) is in distress, the credit shock has little impact on the Chinese banking sector. However, the liquidity shock has shown more substantial effects than that of the credit shock. The discount rate and the rollover ratio play significant roles in determining the contagion effects. If the credit shock and liquidity shock coincide, the contagion effects will be amplified.
Research limitations/implications
The results of this paper reveal the network structure of China's interbank market and the resilience of banking system to the adverse shock. The findings are valuable for regulators to make policies and supervise the systemic important banks.
Originality/value
The balance sheet data of different types of banks are used to construct a bilateral exposure matrix. Based on the matrix, this paper investigates the knock-on effects of credit shock triggered by the debt default in the interbank market, the knock-on effects of liquidity effects, which is featured by “fire sale” of bank assets, and the contagion effects of combined shocks.
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Eva Posch, Elena Eckert and Benni Thiebes
Despite the widespread use and application of resilience, much uncertainty about the conceptualization and operationalization in the context of tourism destinations still exists…
Abstract
Purpose
Despite the widespread use and application of resilience, much uncertainty about the conceptualization and operationalization in the context of tourism destinations still exists. The purpose of this paper is to provide a conceptual elaboration on destination resilience and to introduce a model for an improved understanding of the concept.
Design/methodology/approach
Taking a conceptual research approach, this paper seeks to untangle the fuzziness surrounding the destination and resilience concept by providing a new interpretation that synthesizes theories and concepts from various academic disciplines. It analyses the current debate to derive theoretic baselines and conceptual elements that subsequently inform the development of a new “Destination Resilience Model”.
Findings
The contribution advances the debate by proposing three key themes for future resilience conceptualizations: (1) the value of an actor-centered and agency-based resilience perspective; (2) the importance of the dynamic nature of resilience and the (mis)use of measurement approaches; (3) the adoption of a dualistic resilience perspective distinguishing specified and general resilience. Building on these propositions, we introduce a conceptual model that innovatively links elements central to the concepts of destination and risk and combines different narratives of resilience.
Originality/value
The contribution advances the debate surrounding destination resilience by critically examining the conceptualization and operationalization of destination resilience within previous research and by subsequently proposing a “Destination Resilience Model” that picks up central element of the three new frontiers identified in the conceptually driven review. The innovative integration strengthens the comprehension of the resilience concept at destination level and supports building future capacities to manage immediate adverse impacts as well as novel and systemic risks.
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