Related papers: Measures of Systemic Risk
Systemic risk measures have been shown to be predictive of financial crises and declines in real activity. Thus, forecasting them is of major importance in finance and economics. In this paper, we propose a new forecasting method for…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
Systemic risk measures are crucial for the stability of financial markets, yet classical formulations fail to capture the complexity of market volatility. We propose a new framework for systemic risk measurement on the variable-exponent…
We propose a robust risk measurement approach that minimizes the expectation of overestimation plus underestimation costs. We consider uncertainty by taking the supremum over a collection of probability measures, relating our approach to…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
We survey systemic risks to financial markets and present a high-level description of an algorithm that measures systemic risk in terms of coupled networks.
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
Regulation and risk management in banks depend on underlying risk measures. In general this is the only purpose that is seen for risk measures. In this paper we suggest that the reporting of risk measures can be used to determine the loss…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
The fragility of financial systems was starkly demonstrated in early 2023 through a cascade of major bank failures in the United States, including the second, third, and fourth largest collapses in the US history. The highly interdependent…
We propose a dynamical model for the estimation of Operational Risk in banking institutions. Operational Risk is the risk that a financial loss occurs as the result of failed processes. Examples of operational losses are the ones generated…
Monetary risk measures are usually interpreted as the smallest amount of external capital that must be added to a financial position to make it acceptable. We propose a new concept: intrinsic risk measures and argue that this approach…
The purpose of the research presented in this article is to develop a dynamic system for forecasting and minimizing the risks of an industrial company based on their quantitative assessment. The article considers the conceptual apparatus of…
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of…
Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We…
Systematic investment strategies are exposed to a subtle but pervasive vulnerability: the progressive erosion of their effectiveness as market regimes change. Traditional risk measures, designed to capture volatility or drawdowns, overlook…
The risk of extreme environmental events is of great importance for both the authorities and the insurance industry. This paper concerns risk measures in a spatial setting, in order to introduce the spatial features of damages stemming from…
In this research, starting from a widely accepted definition of risk, we support the idea that risk reduction is a more realistic objective than risk minimization, which represents a theoretical utopia. Furthermore, significant risk…