Related papers: Measures of Systemic Risk
We propose a computational framework to quantify (measure) and to optimize the reliability of complex systems. The approach uses a graph representation of the system that is subject to random failures of its components (nodes and edges).…
We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
Since the latest financial crisis, the idea of systemic risk has received considerable interest. In particular, contagion effects arising from cross-holdings between interconnected financial firms have been studied extensively. Drawing…
This paper derives -- considering a Gaussian setting -- closed form solutions of the statistics that Adrian and Brunnermeier and Acharya et al. have suggested as measures of systemic risk to be attached to individual banks. The statistics…
A classic reachability problem for safety of dynamic systems is to compute the set of initial states from which the state trajectory is guaranteed to stay inside a given constraint set over a given time horizon. In this paper, we leverage…
We introduce two kinds of risk measures with respect to some reference probability measure, which both allow for a certain order structure and domination property. Analyzing their relation to each other leads to the question when a certain…
The dramatic increase of autonomous systems subject to variable environments has given rise to the pressing need to consider risk in both the synthesis and verification of policies for these systems. This paper aims to address a few…
We introduce a novel class of systemic risk measures, the Vulnerability Conditional risk measures, which try to capture the "tail risk" of a risky position in scenarios where one or more market participants is experiencing financial…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
This paper motivates the views that for complex systems, risk should be controlled by enforcing constraints in a modular way at different system levels, that the constraints can be expressed as assurance contracts and that acceptable risk…
Measuring systemic risk or fragility of financial systems is a ubiquitous task of fundamental importance in analyzing market efficiency, portfolio allocation, and containment of financial contagions. Recent attempts have shown that…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
In this paper, we present a unified framework for decision making under uncertainty. Our framework is based on the composite of two risk measures, where the inner risk measure accounts for the risk of decision given the exact distribution…
The policy objective of safeguarding financial stability has stimulated a wave of research on systemic risk analytics, yet it still faces challenges in measurability. This paper models systemic risk by tapping into expert knowledge of…
In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential…
In this paper, we consider a multi-objective control problem for stochastic systems that seeks to minimize a cost of interest while ensuring safety. We introduce a novel measure of safety risk using the conditional value-at-risk and a set…
Protection of creditors is a key objective of financial regulation. Where the protection needs are high, i.e., in banking and insurance, regulatory solvency requirements are an instrument to prevent that creditors incur losses on their…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…