Too Connected to Fail? Inferring Network Ties From Price Co-Movements

Jakob J. Bosma*, Michael Koetter, Michael Wedow

*Bijbehorende auteur voor dit werk

    OnderzoeksoutputAcademicpeer review

    10 Citaten (Scopus)
    262 Downloads (Pure)


    We use extreme value theory methods to infer conventionally unobservable connections between financial institutions from joint extreme movements in credit default swap spreads and equity returns. Estimated pairwise co-crash probabilities identify significant connections among up to 186 financial institutions prior to the crisis of 2007/2008. Financial institutions that were very central prior to the crisis were more likely to be bailed out during the crisis or receive the status of systemically important institutions. This result remains intact also after controlling for indicators of too-big-to-fail concerns, systemic, systematic, and idiosyncratic risks. Both credit default swap (CDS)-based and equity-based connections are significant predictors of bailouts. Supplementary materials for this article are available online.

    Originele taal-2English
    Pagina's (van-tot)67-80
    Aantal pagina's14
    TijdschriftJournal of Business and Economic Statistics
    Nummer van het tijdschrift1
    Vroegere onlinedatum21-dec.-2016
    StatusPublished - 2019

    Citeer dit