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Article

Modeling and Simulating Cross Country Banking Contagion Risks

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Department of Economics and Business Sciences, University of Cagliari, Via S. Ignazio 17, 09123 Cagliari, Italy
2
Department of Accountancy, Bentley University, 175 Forest Street, Waltham, MA 02452, USA
*
Author to whom correspondence should be addressed.
Academic Editor: James R. Barth
J. Risk Financial Manag. 2021, 14(8), 351; https://doi.org/10.3390/jrfm14080351
Received: 28 June 2021 / Revised: 25 July 2021 / Accepted: 27 July 2021 / Published: 31 July 2021
(This article belongs to the Special Issue The Future of Banking Risk and Regulation)
The recent financial crisis proved that financial contagion could spread among countries resulting in disruptive effects. In this paper, by modeling and simulating banking system behavior and linkages across countries, we assess, based on data from the BIS and IMF, the possible outcome of domestic crises and how contagion spreads over countries. Results allow detailing the role of a “lighter” or of a “fueler” of financial crises for each country and assessing how each country can affect each other country by contagion, signaling the importance of financial interdependence between some neighboring countries, and detailing which counterpart country would be affected by the ring-fencing of each considered country’s banking system. The method also allows for what-if analyses to optimize the risk exposures, and to plan an emergency strategy in case of alarms coming from specific countries. View Full-Text
Keywords: banking system; systemic risk; international contagion; Monte Carlo simulation banking system; systemic risk; international contagion; Monte Carlo simulation
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MDPI and ACS Style

Zedda, S.; Spinace-Casale, A. Modeling and Simulating Cross Country Banking Contagion Risks. J. Risk Financial Manag. 2021, 14, 351. https://doi.org/10.3390/jrfm14080351

AMA Style

Zedda S, Spinace-Casale A. Modeling and Simulating Cross Country Banking Contagion Risks. Journal of Risk and Financial Management. 2021; 14(8):351. https://doi.org/10.3390/jrfm14080351

Chicago/Turabian Style

Zedda, Stefano, and Antonella Spinace-Casale. 2021. "Modeling and Simulating Cross Country Banking Contagion Risks" Journal of Risk and Financial Management 14, no. 8: 351. https://doi.org/10.3390/jrfm14080351

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