Results of the SYRTO Project
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Results of the SYRTO Project Roberto Savona - Primary Coordinator of the SYRTO Project University of Brescia Final SYRTO Conference - Université Paris1 Panthéon-Sorbonne February 19, 2016
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Results of the SYRTO Project
- 1. Results of the SYRTO Project SYstemic Risk TOmography: Signals, Measurements, Transmission Channels, and Policy Interventions Roberto Savona - Primary Coordinator of the SYRTO Project University of Brescia Final SYRTO Conference - Université Paris1 Panthéon-Sorbonne February 19, 2016
- 2. Συρτό Seven Women Dancing Archaeological Museum of Olympia
- 3. 0 5,000 10,000 15,000 20,000 25,000 30,000 I II III IV I II III IV I II III IV I II III IV I II III IV I II III 2008 2009 2010 2011 2012 2013 Greek Sovereign CDS 5 yrs
- 4. 0 5,000 10,000 15,000 20,000 25,000 30,000 I II III IV I II III IV I II III IV I II III IV I II III IV I II III 2008 2009 2010 2011 2012 2013 Greek Sovereign CDS 5 yrs-300 -250 -200 -150 -100 -50 0 50 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 BANK -200 -150 -100 -50 0 50 100 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 DEFICIT -400 -300 -200 -100 0 100 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 GDP 0 50 100 150 200 250 300 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 GIPSI -150 -100 -50 0 50 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 IND_PROD -200 -100 0 100 200 300 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 INFL -120 -80 -40 0 40 80 120 II III IV I II III IV I II III IV I II III IV I II 2009 2010 2011 2012 2013 UNEMPL Daily Cross-Sectional CDS Loadings – EU Countries (excl. Greece) Balduzzi, Savona, Alessi (2016) – preliminary results
- 5. Results of the SYRTO Project Paris, 19 February 2016 Roberto Savona Primary and Scientific Coordinator of the SYRTO Project Department of Economics and Management University of Brescia SYRTO Kick-Out Meeting & First LabEx ReFi Conference on Systemic Risk
- 6. Agenda Structure, Objectives & Main Deliverables Research activity WPs 2-6 WP 7 – EWS WP 8 – SYRTO Code
- 7. Structure, Objectives & Main Deliverables
- 8. SYRTO – SYstemic Risk TOmography Funded by the European Union under the 7th Framework Programme. Budget: 2.47 mln €. Structure: Consortium 1. University of Brescia (Italy) – UNIT LEADER 2. CNRS & Paris I Sorbonne (France) 3. Athens University of Economics and Business – RC (Greece) 4. University Cà Foscari Venice (Italy) 5. University of Amsterdam Stichting VU-VUMC (Netherlands) Advisory Board I. Scientific Division II. Policy Division
- 9. Consortium Our team (40 full-time researchers) I. UNIVERSITY OF BRESCIA • Roberto Savona (Primary and Scientific Coordinator) • Maurizio Carpita • Chiara Carini • Marica Manisera • Marco Sandri • Marika Vezzoli • Flaminio Squazzoni • Paola Zuccolotto • Enrico Ciavolino (University of Salento) • Silvia Figini (University of Pavia) II. CENTRE NATIONAL DE LA RECHERCHE SCIENTIFIQUE • Philippe de Peretti • Jorgen Vitting-Andersen • Peter Addo • Hayette Gatfaoui • Dominique Guégan • Rania Kaffel • Lorenzo Frattarolo • Liu Yifang III. ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS – RC • Petros Dellaportas • Efstathia Agelonidi • Anastasios Plataniotis • Ioannis Vrontos IV. UNIVERSITY CA’ FOSCARI VENICE • Monica Billio (Scientific Coordinator) • Loriana Pelizzon • Diana Barro • Roberto Casarin • Michele Costola • Fulvio Corsi • Gloria Gardenal • Martina Nardon • Marcella Lucchetta • Antonio Paradiso • Domenico Sartore • Massimiliano Caporin (University of Padova) V. UNIVERSITY OF AMSTERDAM STICHTING VU-VUMC • Andre Lucas • Arjen Siegman • Siem Jan Koopman • Francisco Blasques • Julia Schaumburg • Dirk Schoenmaker
- 10. Advisory Board I. SCIENTIFIC DIVISION (21 MEMBERS) A. RESEARCH UNIT (6 MEMBERS) A.1. Researchers working with the University of Brescia • Pierluigi Balduzzi (Boston College) • Paolo Manasse (University of Bologna and IGIER Bocconi) A.2. Researchers working with University Cà Foscari Venice • Lorenzo Forni (University of Padua) • Mila Getmansky Sherman (UMass Amherst) • Andrew W. Lo (MIT Sloan) • Roger Stein (MIT Sloan) B. SUPERVISORY UNIT (15 MEMBERS) • Viral V. Acharya (NYU Stern) • Yacine Aït-Sahalia (Princeton University) • Herman K. Van Dijk (VU University Amsterdam) • John Doukas (Old Dominion University) • Darrell Duffie (Stanford University) • Mardi Dungey (University of Tasmania and University of Cambridge) • Paul Embrechts (ETH Zurich) • Robert Engle (NYU Stern) • Rajna Gibson Brandon (University of Geneva) • Christian Gourieroux (University of Toronto and CREST) • David Lando (Copenhagen Business School) • Norman S. Matloff (UC Davis) • Alain Monfort (CREST and University of Maastricht) • Sthephen Schaefer (London Business School) • Charles J. Stone (UC Berkeley)
- 11. Advisory Board (cont’d) II. POLICY DIVISION (14 MEMBERS) • Carsten Detken (ECB) • Gianni Amisano (FRB) • Lucia Alessi (EC) • Thilo Liebig (ESRB, Deutsche Bundesbank) • Andrea M. Maechler (IMF) • Simone Manganelli (ECB) • Bernd Schwaab (ECB) • Giovanni Dell’Ariccia (IMF) • Gianni De Nicolò (IMF) • John Berrigan (DG ECFIN) • Sebastian Schich (OECD) • Mario Quagliariello (EBA) • Kostas Tsatsaronis (BIS) • Xin Zhang (Sveriges Riksbank)
- 12. Objectives Thinking and rethinking the economic and financial system as a system of Sovereigns, Banks with other Financial Intermediaries and Corporations. Financial Networks Topology Looking at the financial system as a biological entity and try to identify the main risk signals also providing the right measures of prevention and interventions. HIV infected cell Banks & Other Fin Int Corporations Sovereigns
- 13. Main Deliverables - Publications 111 Publications ( … but the number is running up): Bankers, Markets & Investors Canadian journal of statistics Computational Statistics & Data Analysis Economic Modelling European Journal of Operational Research Europhysics letters Financial Analysts Journal Intelligent Systems in Accounting, Finance and Management International Journal of Forecasting International Review of Financial Analysis Journal of Advanced Econometrics Journal of Alternative Investments Journal of Applied Econometrics Journal of Banking and Finance Journal of Business and Economic Statistics Journal of Econometrics Journal of Econometrics Journal of Empirical Finance Journal of Forecasting Journal of Money Credit and Banking Journal of Multivariate Analysis Mathematical and Statistical Methods for Actuarial Sciences and Finance Metron Oxford Bulletin of Economics and Statistics Pattern Recognition Letters PLoSONE Procedia Economics and Finance Review of Economics and Statistics Review of Finance Statistical Papers The North American Journal of Economics and Finance 42 Publications in 34 International Peer Reviewed Journals Advances in Latent Variables - Springer Country and Political Risk - Risk Books 4 Chapters in 2 International Peer Reviewed Books Bancaria Comment la régulation financière peut-elle sortir l’Europe de la crise? Statistica & Applicazioni 3 Publications in 3 National Journals 62 Working Papers (under revision & to submit) http://syrtoproject.eu/publications/
- 14. Main Deliverables – Special Issue Special Issue on Systemic Risk Mila Getmanky & Roger M. Stein (eds) Issue: Spring 2016 Contributors: P. Glasserman, G. Tangiralaz (Columbia) S. Das (Santa Clara) S. Battiston, M. D’Errico, S. Gurciullo (Zurich) M. Flood, P. Monin (OFR) H. Mamaysky (Columbia) M. Billio, L. Frattarolo, L. Pelizzon (Ca’ Foscari ) E. Ciavolino, R. Savona (Brescia) A. Lo, R. Stein (MIT) Note: All papers and co-authors presented at CSRA
- 15. Main Deliverables – Book Monograph Systemic Risk Tomography Signals, Measurements and Transmission Channels Editors: Monica Billio Loriana Pelizzon Roberto Savona June 2016
- 16. Main Deliverables – Conferences 4 Big Conferences 2 Workshops and 1 Special Session at EFMA Conference:
- 18. Research activity A step-by-step process Idiosyncratic Risks • We inspected idiosyncratic risks within the financial system thereby making clear the main risk predictors and how these are related to: a) Sovereign risk b) Banks and other Financial Intermediaries risk c) Non-Financial Corporates risk Risk connections • We inspected both the two-way and multi-way risk connections among macro-sectors (Sovereign, Bank & other Financial intermediaries, Non-Financial Corporates) • We explored the main risk linkages and related transmission channels • We proposed novel systemic risk measures EWS SYRTO Code • We assemble an overall EWS to be used as risk barometer for each sector and countries alike, identifying potential threats to financial stability • We realized a “SYRTO Code”: a series of recommendations and prescriptions, on: (a) how to prevent and minimize systemic risks; (b) the best coordination of macro and micro-prudential responsibilities
- 19. Management The management structure of SYRTO Exploitation and Dissemination Group Primary Coordinator Roberto Savona European Commission Executive Board (Project Manager + WP leaders) WP 2 leader WP 3 leader WP 5 leader WP 6 leader WP 7 leader WP 1 leader WP 8 leader WP 4 leader WP 9 leader Advisory Board I. Scientific II. Policy Scientific Coordinators Roberto Savona Monica Billio
- 20. WPs 2-6
- 21. WP 2 – Data Collection Data Center We collect data in order to: (i) Collect relevant information to monitor markets, financial institutions and the economy (ii) Evaluate the severity of the risks impact, both considering individual and systemic risks (iii) Realize a data management infrastructure where data are downloaded for empirical analysis and model calibration Data Management Infrastructure The SYRTO data process is developed using the Konstanz Information Miner Platform (KNIME) (www.knime.org). KNIME is an open-source platform based on the Eclipse Platform, which allows the user to easily and intuitively manage modular data analysis environments.
- 22. WP 3 – Idiosyncratic Risk Mapping Having the objective to detect the fundamental risk sources, we focused on: Idiosyncratic Risks Sovereign risk • Market’s reaction following bad credit event • Transmission shocks within the European CDSs, stock exchange markets, and also between the two Banks & other FI risk • Credit risk in a large banking system • Importance of the interbank market • Hedge fund market • dark pools trading Corporate risk • Data mining tools on corporate balance sheet data with the main aim to detect the best tools to predict corporate defaults
- 23. WP 4-6 – Risk Connections Risk connections among the system Sovereigns-Banks and other Financial Intermediaries-Corporates (S-B&FI-C) Two-way risk connections Factor models with constant, time- varying and stochastic coefficients Multivariate stochastic volatility, to be used a synthesis of bi-variate risk Quantile regressions to equity premium prediction Multi-way risk connections Multi-equation system with latent variables Network analysis Data-mining techniques
- 24. WP 5 – Systemic Risk Indicators Micro Financial Institutions Macro Financial System Aggregate/Disaggregate Institutions ↔ System Standard Measures • Equity-side (CoVaR, …) • Bond-side (CoRisk, ...) New Measures • Risk Ranking • Markov-Switching • Multivariate Stochastic Volatility Model Standard Measures • Dynamic Granger Causality • Principal Component Analysis New Measures • Normalized Ranking • Joint Default Probs, Cycles • Dynamic PCA & Factor Model • Leading Indicators Institutions → System • Entropy Measures • Stress indices & Panels Institutions ← System • Graphical Models • Network Analysis • Dynamic PCA & Factor Model • Leading Indicators
- 25. WP 7 – EWS
- 26. EWS A web platform is realized to visualize our systemic risk measures for Sovereigns, B&FIs and Corporations
- 27. EWS (cont’d) … monitor their risk signals
- 28. EWS (cont’d) … and providing risk maps (Banks)
- 29. WP 8 – SYRTO Code
- 30. SYRTO Code
- 31. SYRTO Code – 6 Take Aways 1. Models to give early warning signals of systemic crisis 2. Low financial stress levels are not synonymous of financial stability 3. Make hard decisions based on soft information 4. Manage the complexity of the financial system 5. There is evidence for a country specific financial role 6. Systemically important institutions are correctly identified
- 33. This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement n° 320270 www.syrtoproject.eu This document reflects only the author’s views. The European Union is not liable for any use that may be made of the information contained therein.