OFRwp0009_GlassermanYoung_HowLikelyContagionFinancialNetworks

93 166 148 167 140 118 135 150 146 129 105 097 112

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Unformatted text preview: in each country group. We now see several cases in which the ratio is less than 1 – for example, when we take Deutsche Bank to be the triggering bank and the two smallest banks in the German group (Landesbank Berlin and DekaBank Deutsch Girozentrale) as the default set we get a ratio of 0.5 in the last column. The results in Tables 1 and 2 reflect the observations we made following Theorem 1 about the relative magnitudes needed for the various model parameters in order that contagion not be weak, and they show that the parameter ranges implying weak contagion are indeed meaningful in practice. 15 In deriving (32), we use the bound in (38), which is conservative. Thus, LR must be greater than 1 whenever WR is, and WR can be finite even when LR is infinite and default through contagion is impossible. 16 We noted previously that a beta distribution can be used to approximate the Gaussian copula loss distribution used in Basel capital standards. We find that the best fit occurs at values of q around 20 or larger. Raising the likelihood ratios in the table to the qth power thus has a major impact. 33 From BNP Paribas WR BNP PARIBAS DEUTSCHE BANK AG HSBC HOLDINGS plc BARCLAYS plc CREDIT AGRICOLE BANCO SANTANDER S.A. SOCIETE GENERALE LLOYDS BANKING GROUP plc BPCE ING BANK NV UNICREDIT S.p.A COMMERZBANK AG RABOBANK NEDERLAND ROYAL BANK OF SCOTLAND GROUP plc INTESA SANPAOLO S.p.A DEXIA Nordea Bank AB (publ) BANCO BILBAO VIZCAYA ARGENTARIA DANSKE BANK ABN AMRO BANK NV Landesbank Baden‐Württemberg Hypo Real Estate Holding AG, Münche BFA‐BANKIA DZ BANK AG Dt. Zentral‐Genossenscha Bayerische Landesbank KBC BANK CAJA DE AHORROS Y PENSIONES DE BA BANCA MONTE DEI PASCHI DI SIENA S Svenska Handelsbanken AB (publ) Norddeutsche Landesbank ‐GZ Skandinaviska Enskilda Banken AB (pub DnB NOR Bank ASA Erste Bank Group (EBG) WestLB AG, Düsseldorf Swedbank AB (publ) Nykredit BANK OF IRELAND HSH Nordbank AG, Hamburg BANCO POPOLARE ‐ S.C. Landesbank Berlin AG ALLIED IRISH BANKS PLC Raiffeisen Bank International (RBI) UNIONE DI BANCHE ITALIANE SCPA (U DekaBank Deutsche Girozentrale, Fran BANCO POPULAR ESPAÑOL, S.A. CAIXA GERAL DE DEPÓSITOS, SA NATIONAL BANK OF GREECE BANCO COMERCIAL PORTUGUÊS, SA (B BANCO DE SABADELL, S.A. EFG EUROBANK ERGASIAS S.A. ESPÍRITO SANTO FINANCIAL GROUP, SA 18.64 18.63 17.83 14.91 12.52 11.23 11.29 10.32 9.55 8.47 6.96 6.06 5.70 4.59 4.52 5.24 4.47 3.91 3.36 3.00 3.38 2.83 2.39 2.73 3.03 2.96 2.61 2.13 1.96 2.26 2.22 1.91 1.82 1.98 1.76 1.63 1.58 1.21 1.12 1.23 1.22 1.19 1.21 1.27 1.25 1.21 1.08 1.01 0.92 LR * * * * 6.68 7.70 12.77 3.44 4.06 3.33 2.48 * 72.67 1.79 1.57 1.85 1.66 1.33 1.23 1.15 1.21 1.21 1.16 1.24 1.24 1.17 1.13 1.09 1.09 1.16 1.17 1.10 1.07 1.10 1.08 1.06 1.05 1.03 1.01 1.03 1.04 1.02 1.03 1.04 1.05 1.03 1.01 1.00 0.99 From Deutsche Bank WR LR 9.21 8.81 7.37 6.19 5.55 5.58 5.10 4.72 4.18 3.44 2.99 2.82 2.27 2.23 2.59 2.21 1.93 1.66 1.48 1.67 1.40 1.18 1.35 1.50 1.46 1.29 1.05 0.97 1.12 1.10 0.94 0.90 0.98 0.87 0.80 0.78 0.60 0.55 0.61 0.60 0.59 0.60 0.63 0.62 0.60 0.53 0.50 0.46 3.89 2.01 1.98 1.62 1.63 1.70 1.46 1.49 1.43 1.33 1.67 1.63 1.19 1.15 1.21 1.16 1.09 1.06 1.03 1.05 1.04 1.02 1.04 1.05 1.04 1.02 1.00 1.00 1.02 1.01 1.00 0.99 1.00 0.99 0.98 0.98 0.96 0.96 0.96 0.95 0.96 0.96 0.96 0.95 0.95 0.96 0.95 0.94 From HSBC WR 8.27 6.92 5....
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This document was uploaded on 02/20/2014 for the course ECON 101 at Pontificia Universidad Católica de Chile.

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