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Probabilistic causality and decisions on bailouts of financial institutions
Journal of Risk Management in Financial Institutions,
10
(2),
201-212
(2017)
Abstract
This paper uses probabilistic causality measures to support decisions about bailouts of financial institutions in non-crisis periods. The model suggested is simple and can easily be applied by practitioners. The approach is tested with daily market-based data of six large UK financial institutions. Contrary to what many experts claim, this study shows evidence that rescuing financial institutions is not always needed in order to prevent systemic crises.
Keywords: bailouts, systemic risk, systemically important institutions, probabilistic causality
The full article is available to subscribers to the journal.
Author's Biography
Fernando Moreira is a Lecturer in Business Economics and the director of the MSc in Banking and Risk at the University of Edinburgh Business School where he teaches risk management focused on financial institutions. He has previously worked for the Central Bank of Brazil (Supervision Department) and is an Associate Editor of the Editorial Board of the Journal of Financial Innovation. He has published in peer-reviewed journals and presented papers at several conferences.
Citation
Moreira, Fernando (2017, April 1). Probabilistic causality and decisions on bailouts of financial institutions. In the Journal of Risk Management in Financial Institutions, Volume 10, Issue 2. https://doi.org/10.69554/NYTT4246.
© Henry Stewart
Publications LLP
Publications LLP