Networks in risk spillovers: A multivariate GARCH perspective

A spatiotemporal approach is proposed for modeling risk spillovers using time-varying proximity matrices based on observable financial networks and a new bilateral Multivariate GARCH specification introduced. The covariance stationarity identification of the model studied, developing quasi-maximum-likelihood estimator analysing its consistency asymptotic normality. Further, it shown how to isolate channels discussed compute target exposure in order reduce system variance. An empirical analysis Euro-area sovereign credit default swap data indicates that Italy Ireland are key players spreading risk, France Portugal major receivers, Spain’s non-trivial role as middleman uncovered.