Skip to main content

Research Repository

Advanced Search

Contagion risk: cases of Islamic and emerging market banks

Yoon, Da-Eun; Choudhury, Tonmoy; Saha, Anup Kumar; Rashid, Mamunur


Da-Eun Yoon

Tonmoy Choudhury

Mamunur Rashid


Globally influential Islamic banks from the Middle East and Southeast Asia carry voluminous correspondence banking with banks from China and India, leading to potential spillover effect of contagion among the banks from these regions. This study aims to investigate the Islamic banks systemic risk contagion with major banks from China and India.

Having the option pricing theory in the backdrop, the authors calculated three different distance to risk measurements (default, insolvency and capital). The authors have included top six listed globally influential Islamic banks, top seven Indian banks and top eight Chinese banks based on their net asset value. They then measured the banks’ extreme shocks based on the extreme value theory by using the logistic regression model. These extreme shocks helped the authors to map the spillover among the selected banks from multiple regions.

The authors have found strong evidences of directional risk spillover among the banks in this sample. Islamic banks are receiving a significant risk spillover from the other sample banks but transmitting less toward the other banks from India and China. Hence, there is strong one-directional risk contagion toward the Islamic banks in the study sample.

Practical implications
This research would be particularly useful to the regulators and bankers from emerging and Islamic markets to understand the conniving nature of the crisis by effectively mapping the source, destination and implementation of the shock transmission mechanism of the potential financial contagion.

Even though the corresponding banking among the top Islamic banks from the Middle East and Southeast Asian countries, and banks from India and China, is on the rise, the assessment of risk among these banks has been limited. In particular, the authors extended on the extreme value theory to focus on the wider impact of spillover, including significant direction of contagion from non-Islamic banks to Islamic banks.


Yoon, D., Choudhury, T., Saha, A. K., & Rashid, M. (2022). Contagion risk: cases of Islamic and emerging market banks. International Journal of Islamic and Middle Eastern Finance and Management, 15(3), 481-505.

Journal Article Type Article
Acceptance Date Apr 15, 2021
Online Publication Date Jul 16, 2021
Publication Date May 6, 2022
Deposit Date May 31, 2023
Journal International Journal of Islamic and Middle Eastern Finance and Management
Print ISSN 1753-8394
Electronic ISSN 1753-8394
Publisher Emerald
Peer Reviewed Peer Reviewed
Volume 15
Issue 3
Pages 481-505
Keywords Finance; Business and International Management