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Jan Henrik Wosnitza

works as an on-site inspector in the field of banking supervision for Deutsche Bundesbank. In particular, he analyses bank internal risk measurement methods. Prior to his recent position, he was a member of the Joint Supervisory Team of a large European cross-border bank. He holds a diploma in physics and a doctorate degree in natural sciences from the University of Muenster. His current research interests include quantitative modeling of financial risks.

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Jan Henrik Wosnitza, Elena Vakhtina: Alarm Index for Institutional Bank Runs

Since the insolvency of Lehman Brothers in September 2008 brought the global financial system to the brink of collapse, there is an undiminished interest in properly understanding liquidity risks and the triggers of liquidity crises. Econophysicists recently developed an alarm index for institutional bank runs (IBRs) based on the log-periodic power law. The key innovation of this alarm index is that it measures the speculative interactions among professional creditors which can culminate in IBRs. The paper at hand extends this line of research, in particular, by applying new critical parameter ranges that were directly derived from credit default swap (CDS) spreads of defaulted banks by Wosnitza and Denz (2013). The better performance of the revised alarm index in comparison to the originally proposed alarm index underpins the hypothesis that the CDS market belongs to a different universality class than, for example, the stock market. Furthermore, the refined index outperforms a modification of the bank run probability index of Veronesi and Zingales (2010) which is treated as a benchmark in our analysis. This result further confirms the hypothesis that – under certain circumstances – financial markets are driven by investors whose investment decisions critically depend on the actions of other investors.

Last modified: 2018.11.30.