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Interdependences among European Banks Via the Market Model

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Author(s): Mohamed Naceur Souissi

Journal: Journal of Computations & Modelling
ISSN 1792-7625

Volume: 2;
Issue: 2;
Start page: 117;
Date: 2012;
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ABSTRACT
Based on the works elaborated by De Nicolo and Kwast (2002), Schüler (2003), Schüler and Schröder (2003), Gropp and Vesala (2003) and Aglietta et al (2000), this article aims at to study the systemic risk within the European Union. Indeed, the correlation between market model residues have been applied for the purpose of highlighting advancing the interdependence among the European banks domestically as well as at across border levels. The method applied is to capture residue from several regressions and calculate the average correlations. Actually, as for as our study sample it has been demonstrated that both domestic as well as cross border interdependences do exist among concerned institutions (i.e. banks). Assuming the propagation of a negative externality, we concluded a possible systemic risk within the European banking industry appears prevalent and plausible in conformity with criteria set by De Nicolo and Kwast (2002), Schüler (2003), Schüler and Schröder (2003).
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