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Systemic Risk Contributions
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Book Synopsis Systemic Risk Contributions by : Klaus Duellmann
Download or read book Systemic Risk Contributions written by Klaus Duellmann and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We put forward a Merton-type multi-factor portfolio model for assessing banks' contributions to systemic risk. This model accounts for the major drivers of banks' systemic relevance: size, default risk and correlation of banks' assets as a proxy for interconnectedness. We measure systemic risk in terms of the portfolio expected shortfall (ES). Banks' (marginal) risk contributions are calculated based on partial derivatives of the ES in order to ensure a full risk allocation among institutions. We compare the performance of an importance sampling algorithm with a fast analytical approximation of the ES and the marginal risk contributions. Furthermore, we show empirically for a portfolio of large international banks how our approach could be implemented to compute bank-specific capital surcharges for systemic risk or stabilisation fees. We find that size alone is not a reliable proxy for the systemic importance of a bank in this framework. In order to smooth cyclical fluctuations of the risk measure, we explore a time-varying confidence level of the ES.
Book Synopsis Systemic Risk Contributions by : Klaus Düllmann
Download or read book Systemic Risk Contributions written by Klaus Düllmann and published by . This book was released on 2011 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Quantifying Systemic Risk by : Joseph G. Haubrich
Download or read book Quantifying Systemic Risk written by Joseph G. Haubrich and published by University of Chicago Press. This book was released on 2013-01-24 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Systemic Risk Contributions by : Xin Huang
Download or read book Systemic Risk Contributions written by Xin Huang and published by . This book was released on 2011 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Bank Size and Systemic Risk by : Mr.Luc Laeven
Download or read book Bank Size and Systemic Risk written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2014-05-08 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Risk Topography by : Markus Brunnermeier
Download or read book Risk Topography written by Markus Brunnermeier and published by University of Chicago Press. This book was released on 2014-10-17 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Handbook on Systemic Risk by : Jean-Pierre Fouque
Download or read book Handbook on Systemic Risk written by Jean-Pierre Fouque and published by Cambridge University Press. This book was released on 2013-05-23 with total page 993 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Measuring Systemic Risk-Adjusted Liquidity (SRL) by : Andreas Jobst
Download or read book Measuring Systemic Risk-Adjusted Liquidity (SRL) written by Andreas Jobst and published by International Monetary Fund. This book was released on 2012-08-01 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Systemic Risk Contribution of Individual Banks by : Hüseyin Çağrı Akkoyun
Download or read book Systemic Risk Contribution of Individual Banks written by Hüseyin Çağrı Akkoyun and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Network Systemic Risk Contributions by : Nikolaus Hautsch
Download or read book Financial Network Systemic Risk Contributions written by Nikolaus Hautsch and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Measuring Systemic Risk by : Deyan Radev
Download or read book Measuring Systemic Risk written by Deyan Radev and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Measuring Network Systemic Risk Contributions by : Sullivan Hué
Download or read book Measuring Network Systemic Risk Contributions written by Sullivan Hué and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Granger-causality measures of interconnectedness between financial institutions are useful indicators of systemic risk (Billio et al., 2012) [Journal of Financial Economics], as they help in evaluating how far the distress of one institution is disseminated across the whole of the financial system through networks. This article provides a critical assessment of Granger-causality networks, showing that they can lead to inconsistent measures of systemic risk contributions because of the presence of spurious causalities arising from indirect contagion effects. The traditional solutions for controlling for these effects using inference on conditional Granger-causality lead to the curse of dimensionality though. To solve this, we provide a measure of financial network systemic risk contributions that is based on the leave-one-out (LOO) concept. For a given financial institution, the new measure evaluates how far the total number of significant Granger-causalities breaks down when this institution is excluded from the system. We control for spurious causalities between the remaining institutions due to the indirect contagion effect of the excluded financial institution using a conditional Granger-causality test, which is free of the curse of dimensionality. Empirical applications are conducted using daily market returns for a sample of the world's largest banks. The results show that our measure gives a meaningful ranking of the systemic importance of financial institutions that is consistent with the ranking of global systemically important banks (G-SIBs) provided by the Financial Stability Board (FSB). Moreover, our measure is shown to be a robust and significant early-warning indicator of large losses from a systemic event, and is strongly driven by balance-sheet variables related to size, business model and profitability.
Book Synopsis Systemic Contingent Claims Analysis by : Mr.Andreas A. Jobst
Download or read book Systemic Contingent Claims Analysis written by Mr.Andreas A. Jobst and published by International Monetary Fund. This book was released on 2013-02-27 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Measuring Systemic Risk by : Deyan Radev
Download or read book Measuring Systemic Risk written by Deyan Radev and published by Springer Nature. This book was released on 2022-02-07 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Short-Term Wholesale Funding and Systemic Risk by : International Monetary Fund
Download or read book Short-Term Wholesale Funding and Systemic Risk written by International Monetary Fund and published by International Monetary Fund. This book was released on 2012-02-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we identify some of the main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find no evidence that a larger size increases systemic risk within the class of large global banks. We also show that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee's proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
Book Synopsis Assessing Banks' Systemic Risk Contribution by : Stefano Zedda
Download or read book Assessing Banks' Systemic Risk Contribution written by Stefano Zedda and published by . This book was released on 2016 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The last financial crisis has shown that large banking crises not only pose a highly dangerous risk to financial systems, but also to both the real economy and public finances. Reducing that risk has become a priority for regulators and governments. Still, the debate is open on what the systemic risk is, and how to measure the contribution of each single bank.Market based measures have almost partially failed this goal, as the markets were not able to adequately signal the system riskiness before the crisis start.In this paper we propose an alternative approach for measuring risk contributions, based on balance sheet data, developed on the idea that the contribution of each bank to the system can be captured by the variation of the expected shortfall of the banking system when excluding the considered bank. We thus refer to it as the Leave-One-Out contribution to systemic risk.This measure can be split as the sum of two components, namely the idiosyncratic bank risk (the value of expected losses of the bank when not linked to the system), and the systemic component, defined as the system expected loss variation due to the bank linkages to the system.Results show that the distinction in idiosyncratic and systemic contribution is relevant, as the two components affects the bank riskiness in different ways, and the balance sheet variables related to each component are different. This consciousness of how linkages affect the system riskiness can relevantly contribute to macroprudential regulation.Moreover, we proof that thresholds set for computing the ES relevantly affect results, so that some banks can have a barrier effect in small crises while having a positive contribution in larger crises.Analyzing the evolution of the European financial system riskiness from 2007 to 2013, differently from the market based measures, we find a huge drop in the systemic component between 2011 and 2013, when the system experienced a strong recapitalization, leading the system to a much more reliable stability than what registered for 2007.Finally, comparing the Leave-One-Out outcome to the Shapley values on a small sample of nine French banks, we proof that the two measures are really highly correlated (more than 99.9%), but as LOO doesn't suffer the computational limits, it is also feasible.
Book Synopsis Contribution to Top Down Portfolio Modeling and Systemic Risk by : Katrin Anita Zilch
Download or read book Contribution to Top Down Portfolio Modeling and Systemic Risk written by Katrin Anita Zilch and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
