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- Title
RISK CONTAGION DUE TO OVERLAPPING PORTFOLIOS WITH LEVERAGE DECISION.
- Authors
ZHU, ZIYAN; LIU, XIAOXING
- Abstract
Since the subprime mortgage crisis, it is urgent to quantify the systemic financial risk and the network externality from the vulnerable perspective. Based on the overlapping portfolio, this study constructs an optimal leverage decision-making model with deleveraging and the fire sales mechanism to describe the liquidity risk spillover effects. Through the empirical results, the institution of a larger size should be more systematically important. Higher leverages account for more vulnerability, while institutions with higher interest ratios of revenue or cost and capital adequacy ratios would be more invulnerable.
- Subjects
PORTFOLIO management (Investments); GLOBAL Financial Crisis, 2008-2009; FINANCIAL risk; SYSTEMIC risk (Finance); CAPITAL costs
- Publication
Advances in Complex Systems, 2021, Vol 24, Issue 7/9, p1
- ISSN
0219-5259
- Publication type
Article
- DOI
10.1142/S0219525921500181