CFE 2019: Start Registration
View Submission - CFE
A0784
Title: Contagion in complex financial networks Authors:  Kumushoy Abduraimova - Imperial College London (United Kingdom) [presenting]
Abstract: With economic integration global financial systems have been becoming more interconnected. Liberalisation of capital accounts, improved access to international capital markets, potentially better risk-sharing and many more are among the benefits of integration that the world has seen. The dark side is contagion though. We introduce a network-based contagion centrality measure that captures non-linear dependencies in extreme events. We apply it to analyse international stock markets contagion. The first observation is that contagion level has increased for all countries, advanced and emerging, during the Financial Crisis 2008. The contagion risk declines for all markets post-crisis, however remains above its pre-crisis level. The second finding is that advanced economies are more central in the global contagion network than the emerging ones. Advanced markets are more connected among each other and with the emerging markets, while the emerging ones do not show strong connection with the rest of emerging world. This resembles a so-called `core-periphery' structure. Finally, the network effect captured by contagion centrality could potentially explain the tail risk of individual countries. More contagion-central countries have lower tail risk. They might be not very prone to tail risk, however, could have significant impact on the whole network conditional on the shock having occurred.