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Systemic Risk Measures And Determinants
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Book Synopsis Systemic Risk: Measures and Determinants by : María Rodríguez-Moreno
Download or read book Systemic Risk: Measures and Determinants written by María Rodríguez-Moreno and published by Ed. Universidad de Cantabria. This book was released on 2016-01-08 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book studies the measurement and the determinants of systemic risk, paying special attention to the role of the Credit Default Swaps (CDSs) either as financial instruments containing valuable information about the soundness of the reference institutions or as a market whose distress contributes to potential systemic shocks on the economy. The measurement of systemic risk is addressed from two perspectives, aggregate and individual contribution to systemic risk where the former refers to the level of systemic risk in the overall economy and the latter to the individual contribution of each financial institution to the overall systemic risk. The analysis of the determinants of the individual contribution of financial institutions to systemic risk focuses on the effect of their portfolio holdings of derivatives. Finally, this thesis studies the liquidity commonalities and their determinants in the corporate CDS worldwide markets. The main participants in these markets are systemically important financial institutions (SIFIs) and so abrupt changes in the market liquidity could cause systemic shocks on the overall economy and, as a consequence, could have adverse effects on global stability.
Book Synopsis Systematic Risk by : María Rodríguez Moreno
Download or read book Systematic Risk written by María Rodríguez Moreno and published by . This book was released on 2015 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 Determinants of Systemic Risk and Information Dissemination by : Marcelo Bianconi
Download or read book Determinants of Systemic Risk and Information Dissemination written by Marcelo Bianconi and published by . This book was released on 2015 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects of two measures of information dissemination on the determination of systemic risk. One measure is print-media consumer sentiment based while the other is volatility based. We find evidence that while the volatility measure (VIX) of future expectations has a more significant direct impact upon systemic risk of financial firms under distress, a consumer sentiment measure based on print-media news does impact upon firm's financial stress via the externality of other firm's financial stress. This latter effect is robust even though the VIX and the consumer sentiment have dynamic feedback in the short one and two-day horizon in levels, and contemporaneously in volatility. In reference to the internet bubble of the 1990s, the consumer sentiment measure predicts larger systemic risk in the whole period of exuberance while the VIX predicts a sharp larger systemic risk in the height of the bubble. Our evidence suggests that print-media consumer sentiment might be dominated by the VIX when predicting systemic risk.
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 Systemic Risk Measures and Their Viability for Banking Supervision by : Benjamin Döring
Download or read book Systemic Risk Measures and Their Viability for Banking Supervision written by Benjamin Döring and published by . This book was released on 2016 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a criteria-based framework to assess the viability of systemic risk measures (SRMs) as a monitoring tool for banking supervision and investigate the determinants of the banking system's overall level of systemic risk. Comparing three prominent SRMs we find that all of them possess substantial forecasting power for banking system distress, however, the measures vary significantly in their predictive accuracy for the state of the real economy. Furthermore, we find that the system-wide market-to-book (MTB) and loan-to-deposit (LTD) ratios act as fundamental drivers of systemic risk. The results have paramount implications. First, the MTB ratio itself may be used as a simple and efficient proxy for the overall systemic tension in the banking system. Second, the systemic relevance of the LTD ratio underlines the critical role of funding liquidity and supports recently proposed regulatory initiatives that curb aggregate liquidity risks. Third, the inclusion of balance sheet data is beneficial for systemic risk measurement.
Book Synopsis A Theoretical and Empirical Examination of the Determinants of Systematic Risk by : Carolyn M. Callahan
Download or read book A Theoretical and Empirical Examination of the Determinants of Systematic Risk written by Carolyn M. Callahan and published by . This book was released on 1985 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 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 Essays on Measuring Systemic Risk by :
Download or read book Essays on Measuring Systemic Risk written by and published by . This book was released on 2014 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores various approaches to measure systemic risk and global financial linkages. It consists of three chapters. Chapter 2 examines the degree of risk interconnectedness between U.S. and European banks using the conditional value-at-risk (CoVaR) approach. The results show that the pairwise CoVaR measure brings value added over value-at risk measure in quantifying the degree of risk dependence between global banks. Chapter 3 compares two distinct methods of estimating systemic risk measures that focus on tail dependence in financial institutions' equity returns: DeltaCoVaR, MES and SRISK. The results highlight the relevance of the simpler estimation methods in identifying and ranking systemically important financial firms. Chapter 4 empirically investigates the determinants of nonperforming loans in the transition economies of Europe. It also study compares the drivers of credit risk for foreign and domestic banks. The empirical results show that macroeconomic environment is a principle factor that impacts banks' loan quality. More importantly, foreign ownership is associated with higher credit risk.
Book Synopsis Trade Credit and Bank Credit by : Inessa Love
Download or read book Trade Credit and Bank Credit written by Inessa Love and published by World Bank Publications. This book was released on 2005 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The authors study the effect of financial crises on trade credit in a sample of 890 firms in six emerging economies. They find that although provision of trade credit increases right after the crisis, it consequently collapses in the following months and years. The authors observe that firms with weaker financial position (for example, high pre-crisis level of short-term debt and low cash stocks and cash flows) are more likely to reduce trade credit provided to their customers. This suggests that the decline in aggregate credit provision is driven by the reduction in the supply of trade credit, which follows the bank credit crunch. The results are consistent with the "redistribution view" of trade credit provision, in which bank credit is redistributed by way of trade credit by the firms with stronger financial position to the firms with weaker financial stand "--World Bank web site.
Book Synopsis The fundamental principles of financial regulation by : Markus Konrad Brunnermeier
Download or read book The fundamental principles of financial regulation written by Markus Konrad Brunnermeier and published by . This book was released on 2009 with total page 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 in Central and Eastern European Banking and Its Determinants. Merton Option Model Approach by : Renata Karkowska
Download or read book Systemic Risk in Central and Eastern European Banking and Its Determinants. Merton Option Model Approach written by Renata Karkowska and published by . This book was released on 2015 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Last crisis and instability of financial markets caused considerable interest within public and academic community in measuring and management systemic risk. This article introduces a new framework for measuring systemic risk by using a risk-adjusted balance sheet approach. In this regard, the analysis of 21 largest commercial banks operating in 7 countries from Central and Eastern Europe, shows potential risk which could threaten all the financial system. The paper concludes new directions for measuring systemic risk by using Merton option model. It shows how risk management tools can be applied in new ways to measure and analyze systemic risk in European banking system. The research results is a systemic risk map for the CEE banking systems. The survey finds also instability risk determinants.
Book Synopsis Systemic Risk, Financial Markets, and Performance of Financial Institutions by : Edward Sun
Download or read book Systemic Risk, Financial Markets, and Performance of Financial Institutions written by Edward Sun and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the exposure and contribution of financial institutions to systemic risks in financial markets. We employ three popular indicators of a financial institution's exposure to systemic risks: the systemic risk index (SRISK) and marginal expected shortfall (MES) of Brownlees and Engle (2012) and the conditional Value-at-Risk (CoVaR) of Adrian and Brunnermeier (2011). We use a primary database of Taiwan financial institutions for our empirical study. A panel containing data of stock market returns and balance sheets of 31 Taiwan financial institutions for 2005-2014 is grouped in three categories: financial holding companies, bank companies, and insurance companies. We focus on systemic risk analysis so as to understand the dynamics of volatility, interdependency, and risk during the recent financial crisis. We then report the time series dynamics and cross sectional rankings of these systemic risk measures. The main results indicate that although these three measures differ in their definition of the contributions to systemic risk, all are quite similar in identifying systemically important financial institutions (SIFIs). Moreover, we find empirical evidence that systemic risk contributions are closely related to certain institution characteristic factors. The results of the Granger causality tests prove that a systemic risk measure is a great alternative tool for monitoring early warning signals of distress in the real economy.
