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Credit and Systemic Risks in the Financial Services Sector: Evidence From the 2008 Global Crisis
Author(s) -
Bégin JeanFrançois,
Boudreault Mathieu,
Doljanu Delia Alexandra,
Gauthier Geneviève
Publication year - 2019
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12210
Subject(s) - credit default swap , business , systemic risk , financial system , financial crisis , credit risk , swap (finance) , portfolio , itraxx , credit valuation adjustment , finance , economics , credit reference , macroeconomics
We develop a portfolio credit risk model that includes firm‐specific Markov‐switching regimes as well as individual stochastic and endogenous recovery rates. Using weekly credit default swap premiums for 35 financial firms, we analyze the credit risk of each of these companies and their statistical linkages, putting emphasis on the 2005–2012 period. Moreover, we study the systemic risk affecting both the banking and insurance subsectors.