SYSTEMIC RISK AND DIVERSIFICATION IN TURKISH
ASS. PROF. NESLIHAN TOPBAS
Volume - 2 Issue - 10, Pages - 4767-4782
Since the global financial crisis, the attention of financial market actors, especially regulators,
have focused on the systemic risk concept. The systemic risk can be defined as the situation
when the failure of a (limited number of) financial institution(s) or the crash of a financial market
creates domino effect on several other financial institutions or markets resulting with their failure
emanating from the initial idiosyncratic shock. This study contributes to literature by being the
one of the rare analysis of Turkish banking system in terms of diversification and systemic risk.
In the analysis, diversification was measured by classifying bank's non-interest- related activities
into net commission revenue, net trading revenue and all other net revenue. The systemic risk
was measured by using Contingent Claims Analysis (CCA) that incorporates market-based and
balance sheet information to obtain financial risk indicators, such as Distance-to-Default (DD).
The data consist of quarterly calculated average diversification indicator (ADI), weighted
average diversification indicator (WADI), distance-to-default (DD) and weighted average
distance-to-default (WADD) for top 6 Turkish commercial banks in in the period between 2009
and 2016. The results show that the relation between diversification and systemic risk is
ambiguous as parallel to the analysis performed other countries.
Cite this Article:
[TOPBAS, NESLIHAN. "SYSTEMIC RISK AND DIVERSIFICATION IN TURKISH BANKING SYSTEM." International Journal of Social Science and Economic Research, vol. 2, no. 10, 2017, pp. 4767-4782. October.]
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