Quantifying Systemic Risk

Author : Joseph G. Haubrich,Andrew W. Lo
Publisher : University of Chicago Press
Page : 286 pages
File Size : 42,9 Mb
Release : 2013-01-24
Category : Business & Economics
ISBN : 9780226921969

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Quantifying Systemic Risk by Joseph G. Haubrich,Andrew W. Lo Pdf

In the aftermath of the recent financial crisis, the federal government has pursued significant regulatory reforms, including proposals to measure and monitor systemic risk. However, there is much debate about how this might be accomplished quantitatively and objectively—or whether this is even possible. A key issue is determining the appropriate trade-offs between risk and reward from a policy and social welfare perspective given the potential negative impact of crises. One of the first books to address the challenges of measuring statistical risk from a system-wide persepective, Quantifying Systemic Risk looks at the means of measuring systemic risk and explores alternative approaches. Among the topics discussed are the challenges of tying regulations to specific quantitative measures, the effects of learning and adaptation on the evolution of the market, and the distinction between the shocks that start a crisis and the mechanisms that enable it to grow.

Author : Markus Brunnermeier,Arvind Krishnamurthy
Publisher : University of Chicago Press
Page : 288 pages
File Size : 42,9 Mb
Release : 2014-10-17
Category : Business & Economics
ISBN : 9780226092645

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Risk Topography by Markus Brunnermeier,Arvind Krishnamurthy Pdf

The recent financial crisis and the difficulty of using mainstream macroeconomic models to accurately monitor and assess systemic risk have stimulated new analyses of how we measure economic activity and the development of more sophisticated models in which the financial sector plays a greater role. Markus Brunnermeier and Arvind Krishnamurthy have assembled contributions from leading academic researchers, central bankers, and other financial-market experts to explore the possibilities for advancing macroeconomic modeling in order to achieve more accurate economic measurement. Essays in this volume focus on the development of models capable of highlighting the vulnerabilities that leave the economy susceptible to adverse feedback loops and liquidity spirals. While these types of vulnerabilities have often been identified, they have not been consistently measured. In a financial world of increasing complexity and uncertainty, this volume is an invaluable resource for policymakers working to improve current measurement systems and for academics concerned with conceptualizing effective measurement.

Author : Deyan Radev
Publisher : Springer Nature
Page : 94 pages
File Size : 42,9 Mb
Release : 2022-02-07
Category : Technology & Engineering
ISBN : 9783030942816

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Measuring Systemic Risk by Deyan Radev Pdf

This book provides a comprehensive methodology to measure systemic risk in many of its facets and dimensions based on state-of-the-art risk assessment methods. Systemic risk has gained attention in the public eye since the collapse of Lehman Brothers in 2008. The bankruptcy of the fourth-biggest bank in the USA raised questions whether banks that are allowed to become “too big to fail” and “too systemic to fail” should carry higher capital surcharges on their size and systemic importance. The Global Financial Crisis of 2008-2009 was followed by the Sovereign Debt Crisis in the euro area that saw the first Eurozone government de facto defaulting on its debt and prompted actions at international level to stem further domino and cascade effects to other Eurozone governments and banks. Against this backdrop, a careful measurement of systemic risk is of utmost importance for the new capital regulation to be successful and for sovereign risk to remain in check. Most importantly, the book introduces a number of systemic fragility indicators for banks and sovereigns that can help to assess systemic risk and the impact of macroprudential and microprudential policies.

Author : Jean-Pierre Fouque,Joseph A. Langsam
Publisher : Cambridge University Press
Page : 993 pages
File Size : 49,5 Mb
Release : 2013-05-23
Category : Business & Economics
ISBN : 9781107023437

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Handbook on Systemic Risk by Jean-Pierre Fouque,Joseph A. Langsam Pdf

The Handbook on Systemic Risk, written by experts in the field, provides researchers with an introduction to the multifaceted aspects of systemic risks facing the global financial markets. The Handbook explores the multidisciplinary approaches to analyzing this risk, the data requirements for further research, and the recommendations being made to avert financial crisis. The Handbook is designed to encourage new researchers to investigate a topic with immense societal implications as well as to provide, for those already actively involved within their own academic discipline, an introduction to the research being undertaken in other disciplines. Each chapter in the Handbook will provide researchers with a superior introduction to the field and with references to more advanced research articles. It is the hope of the editors that this Handbook will stimulate greater interdisciplinary academic research on the critically important topic of systemic risk in the global financial markets.

Author : Andreas Jobst
Publisher : International Monetary Fund
Page : 70 pages
File Size : 50,6 Mb
Release : 2012-08-01
Category : Business & Economics
ISBN : 9781475505597

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Measuring Systemic Risk-Adjusted Liquidity (SRL) by Andreas Jobst Pdf

Little progress has been made so far in addressing—in a comprehensive way—the externalities caused by impact of the interconnectedness within institutions and markets on funding and market liquidity risk within financial systems. The Systemic Risk-adjusted Liquidity (SRL) model combines option pricing with market information and balance sheet data to generate a probabilistic measure of the frequency and severity of multiple entities experiencing a joint liquidity event. It links a firm’s maturity mismatch between assets and liabilities impacting the stability of its funding with those characteristics of other firms, subject to individual changes in risk profiles and common changes in market conditions. This approach can then be used (i) to quantify an individual institution’s time-varying contribution to system-wide liquidity shortfalls and (ii) to price liquidity risk within a macroprudential framework that, if used to motivate a capital charge or insurance premia, provides incentives for liquidity managers to internalize the systemic risk of their decisions. The model can also accommodate a stress testing approach for institution-specific and/or general funding shocks that generate estimates of systemic liquidity risk (and associated charges) under adverse scenarios.

Author : Prasanna Gai
Publisher : Oxford University Press
Page : 147 pages
File Size : 42,7 Mb
Release : 2013-03-28
Category : Business & Economics
ISBN : 9780199544493

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Systemic Risk by Prasanna Gai Pdf

This book applies some of the lessons from network disciplines - such as ecology, epidemiology, and engineering - to study and measure how small probability events can lead to contagion and banking crises on a global scale.

Author : Zhiguo He,Arvind Krishnamurthy
Publisher : Unknown
Page : 0 pages
File Size : 41,9 Mb
Release : 2012
Category : Electronic
ISBN : OCLC:901565490

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A Macroeconomic Framework for Quantifying Systemic Risk by Zhiguo He,Arvind Krishnamurthy Pdf

Author : Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto
Publisher : International Monetary Fund
Page : 45 pages
File Size : 40,8 Mb
Release : 2018-03-09
Category : Business & Economics
ISBN : 9781484345344

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Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses by Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto Pdf

We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the distress of other entities in the system. This valuation is made possible by a multivariate density which characterizes the asset values of the financial entities making up the system. In this paper this density is estimated using CIMDO, a statistical approach, which infers densities that are consistent with entities’ probabilities of default, which in this case are estimated using market-based data. Hence, SE losses capture the effects of interconnectedness structures that are consistent with markets’ perceptions of risk. We then show how SE losses can be decomposed into the likelihood of distress and the magnitude of losses, thereby quantifying the contribution of specific entities to systemic contagion. To illustrate the approach, we quantify SE losses due to Lehman Brothers’ default.

Author : Mr.Raphael A Espinoza,Miguel A. Segoviano,Ji Yan
Publisher : International Monetary Fund
Page : 39 pages
File Size : 51,5 Mb
Release : 2020-03-13
Category : Business & Economics
ISBN : 9781513536170

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Systemic Risk Modeling: How Theory Can Meet Statistics by Mr.Raphael A Espinoza,Miguel A. Segoviano,Ji Yan Pdf

We propose a framework to link empirical models of systemic risk to theoretical network/ general equilibrium models used to understand the channels of transmission of systemic risk. The theoretical model allows for systemic risk due to interbank counterparty risk, common asset exposures/fire sales, and a “Minsky" cycle of optimism. The empirical model uses stock market and CDS spreads data to estimate a multivariate density of equity returns and to compute the expected equity return for each bank, conditional on a bad macro-outcome. Theses “cross-sectional" moments are used to re-calibrate the theoretical model and estimate the importance of the Minsky cycle of optimism in driving systemic risk.

Author : Mr.Andreas A. Jobst,Mr.Dale F. Gray
Publisher : International Monetary Fund
Page : 93 pages
File Size : 48,8 Mb
Release : 2013-02-27
Category : Business & Economics
ISBN : 9781475557534

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Systemic Contingent Claims Analysis by Mr.Andreas A. Jobst,Mr.Dale F. Gray Pdf

The recent global financial crisis has forced a re-examination of risk transmission in the financial sector and how it affects financial stability. Current macroprudential policy and surveillance (MPS) efforts are aimed establishing a regulatory framework that helps mitigate the risk from systemic linkages with a view towards enhancing the resilience of the financial sector. This paper presents a forward-looking framework ("Systemic CCA") to measure systemic solvency risk based on market-implied expected losses of financial institutions with practical applications for the financial sector risk management and the system-wide capital assessment in top-down stress testing. The suggested approach uses advanced contingent claims analysis (CCA) to generate aggregate estimates of the joint default risk of multiple institutions as a conditional tail expectation using multivariate extreme value theory (EVT). In addition, the framework also helps quantify the individual contributions to systemic risk and contingent liabilities of the financial sector during times of stress.

Author : Xavier Freixas,Luc Laeven,Jose-Luis Peydro
Publisher : MIT Press
Page : 487 pages
File Size : 40,9 Mb
Release : 2023-08-22
Category : Business & Economics
ISBN : 9780262549011

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Systemic Risk, Crises, and Macroprudential Regulation by Xavier Freixas,Luc Laeven,Jose-Luis Peydro Pdf

A framework for macroprudential regulation that defines systemic risk and macroprudential policy, describes macroprudential tools, and surveys the effectiveness of existing macroprudential regulation. The recent financial crisis has shattered all standard approaches to banking regulation. Regulators now recognize that banking regulation cannot be simply based on individual financial institutions' risks. Instead, systemic risk and macroprudential regulation have come to the forefront of the new regulatory paradigm. Yet our knowledge of these two core aspects of regulation is still limited and fragmented. This book offers a framework for understanding the reasons for the regulatory shift from a microprudential to a macroprudential approach to financial regulation. It defines systemic risk and macroprudential policy, cutting through the generalized confusion as to their meaning; contrasts macroprudential to microprudential approaches; discusses the interaction of macroprudential policy with macroeconomic policy (monetary policy in particular); and describes macroprudential tools and experiences with macroprudential regulation around the world. The book also considers the remaining challenges for establishing effective macroprudential policy and broader issues in regulatory reform. These include the optimal size and structure of the financial system, the multiplicity of regulatory bodies in the United States, the supervision of cross-border financial institutions, and the need for international cooperation on macroprudential policies.

Author : New York University Stern School of Business
Publisher : John Wiley & Sons
Page : 592 pages
File Size : 50,7 Mb
Release : 2010-10-28
Category : Business & Economics
ISBN : 9780470949863

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Regulating Wall Street by New York University Stern School of Business Pdf

Experts from NYU Stern School of Business analyze new financial regulations and what they mean for the economy The NYU Stern School of Business is one of the top business schools in the world thanks to the leading academics, researchers, and provocative thinkers who call it home. In Regulating Wall Street: The New Architecture of Global Finance, an impressive group of the Stern school’s top authorities on finance combine their expertise in capital markets, risk management, banking, and derivatives to assess the strengths and weaknesses of new regulations in response to the recent global financial crisis. Summarizes key issues that regulatory reform should address Evaluates the key components of regulatory reform Provides analysis of how the reforms will affect financial firms and markets, as well as the real economy The U.S. Congress is on track to complete the most significant changes in financial regulation since the 1930s. Regulating Wall Street: The New Architecture of Global Finance discusses the impact these news laws will have on the U.S. and global financial architecture.

Author : Mr.Luc Laeven,Mr.Lev Ratnovski,Mr.Hui Tong
Publisher : International Monetary Fund
Page : 34 pages
File Size : 51,5 Mb
Release : 2014-05-08
Category : Business & Economics
ISBN : 9781484363720

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Bank Size and Systemic Risk by Mr.Luc Laeven,Mr.Lev Ratnovski,Mr.Hui Tong Pdf

The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.

Author : Xin Huang,Hao Zhou,Haibin Zhu
Publisher : Unknown
Page : 54 pages
File Size : 40,8 Mb
Release : 2010
Category : Financial risk management
ISBN : IND:30000128935743

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Assessing the Systemic Risk of a Heterogeneous Portfolio of Banks During the Recent Financial Crisis by Xin Huang,Hao Zhou,Haibin Zhu Pdf

This paper extends the approach of measuring and stress-testing the systemic risk of a banking sector in Huang, Zhou, and Zhu (2009) to identifying various sources of financial instability and to allocating systemic risk to individual financial institutions. The systemic risk measure, defined as the insurance cost to protect against distressed losses in a banking system, is a summary indicator of market perceived risk that reflects expected default risk of individual banks, risk premia as well as correlated defaults. An application of our methodology to a portfolio of twenty-two major banks in Asia and the Pacific illustrates the dynamics of the spillover effects of the global financial crisis to the region. The increase in the perceived systemic risk, particularly after the failure of Lehman Brothers, was mainly driven by the heightened risk aversion and the squeezed liquidity. Further analysis, which is based on our proposed approach to quantifying the marginal contribution of individual banks to the systemic risk, suggests that 'too-big-to-fail' is a valid concern from a macroprudential perspective of bank regulation.

Author : Oliviero Roggi
Publisher : World Scientific
Page : 519 pages
File Size : 40,6 Mb
Release : 2013
Category : Business & Economics
ISBN : 9789814417501

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Managing and Measuring of Risk by Oliviero Roggi Pdf

This volume presents the most recent achievements in risk measurement and management, as well as regulation of the financial industry, with contributions from prominent scholars and practitioners, and provides a comprehensive overview of recent emerging standards in risk management from an interdisciplinary perspective.