Networks in risk spillovers: A multivariate GARCH perspective

Monica Billio, Massimiliano Caporin, Lorenzo Frattarolo and Loriana Pelizzon ()

No 225, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We propose a spatiotemporal approach for modeling risk spillovers using time-varying proximity matrices based on observable financial networks and introduce a new bilateral specification. We study covariance stationarity and identification of the model, and analyze consistency and asymptotic normality of the quasi-maximum-likelihood estimator. We show how to isolate risk channels and we discuss how to compute target exposure able to reduce system variance. An empirical analysis on Euro-area cross-country holdings shows that Italy and Ireland are key players in spreading risk, France and Portugal are the major risk receivers, and we uncover Spain's non-trivial role as risk middleman.

Keywords: spatial GARCH; network; risk spillover; financial spillover (search for similar items in EconPapers)
JEL-codes: C58 G10 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (4)

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https://www.econstor.eu/bitstream/10419/181755/1/1029683409.pdf (application/pdf)

Related works:
Journal Article: Networks in risk spillovers: A multivariate GARCH perspective (2023)
Working Paper: Networks in risk spillovers: A multivariate GARCH perspective (2020)
Working Paper: Networks in risk spillovers: a multivariate GARCH perspective (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:225

DOI: 10.2139/ssrn.3239369

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