Related papers: Measures of Systemic Risk
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
The inability to see and quantify systemic financial risk comes at an immense social cost. Systemic risk in the financial system arises to a large extent as a consequence of the interconnectedness of its institutions, which are linked…
Following several episodes of financial market turmoil in recent decades, changes in systemic risk have drawn growing attention. Therefore, we propose surveillance schemes for systemic risk, which allow to detect misspecified systemic risk…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a…
The global balance index is used in the network literature to quantify how balanced a signed network is. In this paper we show that the global balance index of financial correlation networks can be used as a systemic risk measure. We define…
We provide an overview of the relationship between financial networks and systemic risk. We present a taxonomy of different types of systemic risk, differentiating between direct externalities between financial organizations (e.g.,…
We investigate to which extent the relevant features of (static) Systemic Risk Measures can be extended to a conditional setting. After providing a general dual representation result, we analyze in greater detail Conditional Shortfall…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
The paper provides a framework for the assessment and optimization of the total risk of complex distributed systems. The framework takes into account the risk of each agent, which may arise from heterogeneous sources, as well as the risk…
Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Monitoring means to observe a system for any changes which may occur over time, using a monitor or measuring device of some sort. In this paper we formulate a problem of monitoring dates of maximal risk of a financial position. Thus, the…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
The concept of resilience embodies the quest towards the ability to sustain shocks, to suffer from these shocks as little as possible, for the shortest time possible, and to recover with the full functionalities that existed before the…
In this paper, we introduce the rich classes of conditional distortion (CoD) risk measures and distortion risk contribution ($\Delta$CoD) measures as measures of systemic risk and analyze their properties and representations. The classes…
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…