{
  "title": "Denmark: Financial Sector Assessment Program-Technical Note-Financial Sector Interconnectedness and Contagion Risk Analysis",
  "publication": "IMF Staff Country Reports, August 12, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2020/08/07/denmark-financial-sector-assessment-program-technical-note-financial-sector-49666",
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  "summary": "The FSAP developed a novel multi-layer contagion model to analyze financial system interconnectedness using a new and comprehensive database.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The FSAP developed a novel multi-layer contagion model to analyze financial system interconnectedness using a new and comprehensive database.\n- The infrastructure is based on securities data and newly-released confidential credit register data.\n- The simulation exercise consists of a series of idiosyncratic shocks, where the default of each node is triggered iteratively.\n- The model introduces a repricing channel on traded securities to capture cascade effects arising from market reactions to changes in an entity’s solvency condition."
    },
    {
      "heading": "Model and Data",
      "content": "- Multi-layer contagion model distinguishing transmission of shocks between eight exposure types or layers:\n  - loans\n  - deposits\n  - reverse repos\n  - covered bonds\n  - other debt securities\n  - equities\n  - unlisted shares\n  - other claims\n- Data sources:\n  - securities data\n  - newly-released confidential credit register data"
    },
    {
      "heading": "Scope and Coverage",
      "content": "- Primary focus:\n  - the banking system (banks and MCIs)\n  - interconnections through the covered bond market as cornerstones of the overall financial system\n- Additional included exposures:\n  - non-bank financial institutions (insurer, pension and investment funds)\n  - non-financial sectors (households, corporates)\n  - exposures both domestically and abroad"
    },
    {
      "heading": "Simulation Design and Mechanisms",
      "content": "- Iterative idiosyncratic shock framework: each node’s default is triggered iteratively to assess contagion.\n- Repricing channel on traded securities to capture market-driven cascade effects linked to changes in solvency.\n- Distinguishes transmission across multiple exposure types to capture cross-market spillovers (e.g., loans versus securities versus covered bonds).\n\n---\n\n Content in this bundle\n\n- 1dnkea2020007\n  - 1dnkea2020007 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1dnkea2020007 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: August 12, 2020",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781513553061.002",
    "The FSAP developed a novel multi-layer contagion model to analyze financial system interconnectedness using a new and comprehensive database.",
    "The infrastructure is based on securities data and newly-released confidential credit register data.",
    "The simulation exercise consists of a series of idiosyncratic shocks, where the default of each node is triggered iteratively.",
    "The model introduces a repricing channel on traded securities to capture cascade effects arising from market reactions to changes in an entity’s solvency condition.",
    "Multi-layer contagion model distinguishing transmission of shocks between eight exposure types or layers:",
    "Data sources:",
    "Primary focus:",
    "Additional included exposures:",
    "Iterative idiosyncratic shock framework: each node’s default is triggered iteratively to assess contagion.",
    "Repricing channel on traded securities to capture market-driven cascade effects linked to changes in solvency.",
    "Distinguishes transmission across multiple exposure types to capture cross-market spillovers (e.g., loans versus securities versus covered bonds).",
    "**1dnkea2020007**"
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