Abstract

We propose a method to extract significant risk interactions between Countries adopting the Graphical Lasso algorithm, used in graph theory to sort out the spurious effect of common components. In this context, the major issue is the definition of the penalization parameter. We propose a search algorithm aimed at the best separation of the variables (expressed in terms of conditional dependence) given an a priori desired partition. The case study focuses on Sovereign Bond Yields over the period 2009–2017. The proposed algorithm is used in systemic risk estimation of the Euro area sovereigns.
Lingua originaleEnglish
Titolo della pubblicazione ospiteBook of Short Papers SIS 2018
Pagine1429-1434
Numero di pagine6
Stato di pubblicazionePubblicato - 2018
EventoSIS 2018 - Palermo
Durata: 20 giu 201822 giu 2018

Convegno

ConvegnoSIS 2018
CittàPalermo
Periodo20/6/1822/6/18

Keywords

  • Graphical Lasso algorithm
  • Network dependence
  • Systemic risk

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