Related papers: Measures of Systemic Risk
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
Risk is part of the fabric of every business; surprisingly, there is little work on establishing best practices for systematic, repeatable risk identification, arguably the first step of any risk management process. In this paper, we…
We introduce a general framework for measuring risk in the context of Markov control processes with risk maps on general Borel spaces that generalize known concepts of risk measures in mathematical finance, operations research and…
The need for control strategies that can address dynamic system uncertainty is becoming increasingly important. In this work, we propose a Model Predictive Control by quantifying the risk of failure in our system model. The proposed control…
Regulatory requirements dictate that financial institutions must calculate risk capital (funds that must be retained to cover future losses) at least annually. Procedures for doing this have been well-established for many years, but recent…
The multivariate conditional probability distribution models the effects of a set of variables onto the statistical properties of another set of variables. In the study of systemic risk in a financial system, the multivariate conditional…
Identification and scoring functions are statistical tools to assess the calibration and the relative performance of risk measure estimates, e.g., in backtesting. A risk measures is called identifiable (elicitable) it it admits a strict…
Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…
Resilience broadly describes a quality of withstanding perturbations. Measures of system resilience have gathered increasing attention across applied disciplines, yet existing metrics often lack computational accessibility and…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
We address a fundamental problem that is systematically encountered when modeling complex systems: the limitedness of the information available. In the case of economic and financial networks, privacy issues severely limit the information…
We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
This paper characterizes the probability of a market failure defined as the default of two or more globally systemically important banks (G-SIBs) in a small interval of time. The default probabilities of the G-SIBs are correlated through…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
We consider a group consisting of N business units. We suppose there are regulatory constraints for each unit, more precisely, the net worth of each business unit is required to belong to a set of acceptable risks, assumed to be a convex…
Model risk has a huge impact on any risk measurement procedure and its quantification is therefore a crucial step. In this paper, we introduce three quantitative measures of model risk when choosing a particular reference model within a…
The standard theory of coherent risk measures fails to consider individual institutions as part of a system which might itself experience instability and spread new sources of risk to the market participants. In compliance with an approach…
The purpose of this paper is to utilize statistical methodologies to infer from market prices of assets and their derivatives the magnitude of the set of a measure M that defines acceptance sets of risky future cash flows. Specifically, we…
This paper introduces a novel framework to study default dependence and systemic risk in a financial network that evolves over time. We analyse several indicators of risk, and develop a new latent space model to assess the health of key…