The Joint Credit Risk of UK Global-Systemically Important Banks

Cerrato, M; Crosby, AJ; Kim, M; Zhao, Y

The Joint Credit Risk of UK Global-Systemically Important Banks

Cerrato, M Crosby, AJ

Kim, M Zhao, Y

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Publisher:: Wiley
Publication Type:: Journal Article
Citation:: Journal of Futures Markets, 2017, 37 (10), pp. 964 - 988
Issue Date:: 2017-10

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Field	Value	Language
dc.contributor.author	Cerrato, M	en_US
dc.contributor.author	Crosby, AJ https://orcid.org/0000-0003-4179-9464	en_US
dc.contributor.author	Kim, M	en_US
dc.contributor.author	Zhao, Y	en_US
dc.date.issued	2017-10	en_US
dc.identifier.citation	Journal of Futures Markets, 2017, 37 (10), pp. 964 - 988	en_US
dc.identifier.issn	0270-7314	en_US
dc.identifier.uri	http://hdl.handle.net/10453/125465
dc.description.abstract	We study the joint credit risk in the UK banking sector using the weekly CDS spreads of global systemically important banks over 2007–2015. We show that the time‐varying and asymmetric dependence structure of the CDS spread changes is closely related to the joint default probability that two or more banks simultaneously default. We are able to flexibly measure the joint credit risk at the high‐frequency level by applying the combination of the reduced‐form model and the GAS‐based dynamic asymmetric copula model to the CDS spreads. We also verify that much of the dependence structure of the CDS spread changes are driven by the market factors. Overall, our study demonstrates that the market factors are key inputs for the effective management of the systemic credit risk in the banking sector.	en_US
dc.publisher	Wiley	en_US
dc.relation.ispartof	Journal of Futures Markets	en_US
dc.relation.isbasedon	10.1002/fut.21855	en_US
dc.subject.classification	Finance	en_US
dc.title	The Joint Credit Risk of UK Global-Systemically Important Banks	en_US
dc.type	Journal Article
utslib.citation.volume	10	en_US
utslib.citation.volume	37	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	true	en_US
pubs.issue	10	en_US
pubs.publication-status	Published	en_US
pubs.volume	37	en_US

Abstract:

We study the joint credit risk in the UK banking sector using the weekly CDS spreads of global systemically important banks over 2007–2015. We show that the time‐varying and asymmetric dependence structure of the CDS spread changes is closely related to the joint default probability that two or more banks simultaneously default. We are able to flexibly measure the joint credit risk at the high‐frequency level by applying the combination of the reduced‐form model and the GAS‐based dynamic asymmetric copula model to the CDS spreads. We also verify that much of the dependence structure of the CDS spread changes are driven by the market factors. Overall, our study demonstrates that the market factors are key inputs for the effective management of the systemic credit risk in the banking sector.

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http://hdl.handle.net/10453/125465