Bank system stability: cross-Atlantic perspective

This ECB Working Paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks' equity prices.

The authors use new tools available from multivariate extreme value theory to estimate individual banks' exposure to each other ("contagion risk") and to systematic risk. By applying structural break tests to those measures we study whether capital markets indicate changes in the importance of systemic risk over time. Using data for the

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