Front Matter Page
Monetary and Capital Markets Department
Authorized for distribution by Mark Swinburne
Contents
I. Introduction
II. Distress Dependence among Banks and Stability of the Banking System
III. Banking System Multivariate Density
A. The CIMDO Approach: Modeling the Banking System Multivariate Density
B. The CIMDO-copula: Distress Dependence among Banks in the System
IV. Banking Stability Measures
A. Common Distress in the Banks of the System
B. Distress Between Specific Banks
C. Distress in the System Associated with a Specific Bank
V. Banking Stability Measures: Empirical Results
A. Estimation of Probabilities of Distress of Individual Banks
B. Examination of Relative Changes of Stability over Time
C. Analysis of Cross-Region Effects Between Different Banking Groups
D. Analysis of Foreign Banks’ Risks to Sovereigns with Banking Systems with Cross-Border Institutions
VI. Conclusions
References
Tables
1. Distress Dependence Matrix
2. Distress Dependence Matrix: American and European Banks
3. Distress Dependence Matrix: Latin America. Sovereigns and Banks
4. Distress Dependence Matrix: Eastern Europe. Sovereigns and Banks
5. Distress Dependence Matrix: Asia. Sovereigns and Banks
Figures
1. The Probability of Distress
2. The Banking System’s Multivariate Density
3. Probability That At Least One Bank Becomes Distressed
4. Joint Probability of Distress
5. Banking Stability Index
6. Daily Percentage Increase: Joint and Average Probability of Distress
7. PAO: Lehman
8. Foreign-Bank and Sovereign Risks
Box
1. Drawbacks to the Characterization of Distress Dependence of Financial Returns with Correlations
Appendixes
I. Copula Functions
II. CIMDO-copula
III. CIMDO-density and CIMDO-copula Evaluation Framework
IV. Estimation of Probabilities of Distress of Individual Banks