Measures of Systemic Risk
46 mins 16 secs,
671.84 MB,
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| Description: |
Weber, S (Leibniz Universität Hannover)
Thursday 28 August 2014, 16:15-16:45 |
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| Created: | 2014-08-29 12:21 |
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| Collection: | Systemic Risk: Mathematical Modelling and Interdisciplinary Approaches |
| Publisher: | Isaac Newton Institute |
| Copyright: | Weber, S |
| Language: | eng (English) |
| Distribution: |
World
(downloadable)
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| Explicit content: | No |
| Aspect Ratio: | 16:9 |
| Screencast: | No |
| Bumper: | UCS Default |
| Trailer: | UCS Default |
| Abstract: | Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of this type of risk requires the design and implementation of tools for the efficient macroprudential regulation of financial institutions. The talk proposes a novel approach to measuring systemic risk.
Key to our construction is the philosophy that there is no distinction between risk and capital requirements, as recently described in Artzner, Delbaen & Koch-Medina (2009). Such an approach is ideal for regulatory purposes. The suggested systemic risk measures express systemic risk in terms of capital endowments of the financial firms. These endowments constitute the eligible assets of the procedure. Acceptability is defined in terms of cash flows to the entire society and specified by a standard acceptance set of an arbitrary scalar risk measure. Random cash flows can be derived conditional on the capital endowments of the firms within a large class of models of financial systems. These may include both local and global interaction. The resulting systemic risk measures are set-valued and allow a mathematical analysis on the basis of set-valued convex analysis. We explain the conceptual framework and the definition of systemic risk measures, provide algorithms for their computation, and illustrate their application in numerical case studies - e.g. in the network models of Eisenberg & Noe (2001), Cifuentes, Shin & Ferrucci (2005), and Amini, Filipovic & Minca (2013). This is joint work with Zachary G. Feinstein (Washington University in St. Louis) and Birgit Rudloff (Princeton University). |
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