Explicit Expressions and Bounds of Performance and Systemic Risk Measures in Symmetric Linear Systems Driven by Heavy-Tailed Noise

2018 ◽  
Author(s):  
Christoforos Somarakis ◽  
Yaser Ghaedsharaf ◽  
Nader Motee
Keyword(s):  
Linear Systems ◽  
Systemic Risk ◽  
Risk Measures ◽  
Heavy Tailed ◽  
Explicit Expressions

Conditional excess risk measures and multivariate regular variation

2019 ◽  
Vol 36 (1-4) ◽  
pp. 1-23
Author(s):  
Bikramjit Das ◽  
Vicky Fasen-Hartmann
Keyword(s):  
Risk Factors ◽  
Asymptotic Behavior ◽  
Systemic Risk ◽  
Regular Variation ◽  
Risk Measures ◽  
Excess Risk ◽  
Multivariate Regular Variation ◽  
Marginal Expected Shortfall ◽  
Broad Framework ◽  
Heavy Tailed

Abstract Conditional excess risk measures like Marginal Expected Shortfall and Marginal Mean Excess are designed to aid in quantifying systemic risk or risk contagion in a multivariate setting. In the context of insurance, social networks, and telecommunication, risk factors often tend to be heavy-tailed and thus frequently studied under the paradigm of regular variation. We show that regular variation on different subspaces of the Euclidean space leads to these risk measures exhibiting distinct asymptotic behavior. Furthermore, we elicit connections between regular variation on these subspaces and the behavior of tail copula parameters extending previous work and providing a broad framework for studying such risk measures under multivariate regular variation. We use a variety of examples to exhibit where such computations are practically applicable.

Pitfalls in the Use of Systemic Risk Measures

2018 ◽  
Vol 53 (1) ◽  
pp. 269-298 ◽  
Author(s):  
Gunter Löffler ◽  
Peter Raupach
Keyword(s):  
Side Effects ◽  
Systemic Risk ◽  
Risk Measures ◽  
Systematic Risk ◽  
Idiosyncratic Risk ◽  
Adverse Side Effects ◽  
Heavy Tailed Distributions ◽  
Linear And Nonlinear ◽  
Heavy Tailed

We examine pitfalls in the use of return-based measures of systemic risk contributions (SRCs). For both linear and nonlinear return frameworks, assuming normal and heavy-tailed distributions, we identify nonexotic cases in which a change in a bank’s systematic risk, idiosyncratic risk, size, or contagiousness increases the risk of the system but lowers the measured SRC of the bank. Assessments based on estimated SRCs could thus produce false interpretations and incentives. We also identify potentially adverse side effects: A change in a bank’s risk structure can make the measured SRC of its competitors increase more strongly than its own.

scholarly journals Early warning of systemic risk in global banking: eigen-pair R number for financial contagion and market price-based methods

2021 ◽  
Author(s):  
Sheri Markose ◽  
Simone Giansante ◽  
Nicolas A. Eterovic ◽  
Mateusz Gatkowski
Keyword(s):  
Early Warning ◽  
Systemic Risk ◽  
Value At Risk ◽  
Risk Measures ◽  
Market Price ◽  
System Stability ◽  
Conditional Value At Risk ◽  
Centrality Measures ◽  
Global Banking ◽  
Pair Method

AbstractWe analyse systemic risk in the core global banking system using a new network-based spectral eigen-pair method, which treats network failure as a dynamical system stability problem. This is compared with market price-based Systemic Risk Indexes, viz. Marginal Expected Shortfall, Delta Conditional Value-at-Risk, and Conditional Capital Shortfall Measure of Systemic Risk in a cross-border setting. Unlike paradoxical market price based risk measures, which underestimate risk during periods of asset price booms, the eigen-pair method based on bilateral balance sheet data gives early-warning of instability in terms of the tipping point that is analogous to the R number in epidemic models. For this regulatory capital thresholds are used. Furthermore, network centrality measures identify systemically important and vulnerable banking systems. Market price-based SRIs are contemporaneous with the crisis and they are found to covary with risk measures like VaR and betas.

Short Communication: Robust Market-Adjusted Systemic Risk Measures

2021 ◽  
Vol 12 (3) ◽  
pp. SC70-SC82
Author(s):  
Matteo Burzoni ◽  
Marco Frittelli ◽  
Federico Zorzi
Keyword(s):  
Systemic Risk ◽  
Short Communication ◽  
Risk Measures

Systemic Risk, Stress Testing, and Financial Contagion

2014 ◽  
pp. 282-310
Author(s):  
Calixto Lopez-Castañon ◽  
Serafin Martinez-Jaramillo ◽  
Fabrizio Lopez-Gallo
Keyword(s):  
Systemic Risk ◽  
Research Agenda ◽  
Stress Testing ◽  
Risk Measures ◽  
Banking System ◽  
Financial Contagion ◽  
Interbank Market ◽  
Coherent Risk ◽  
Central Bankers ◽  
Standard Risk

Despite the acknowledgment of the relevance of Systemic Risk, there is a lack of consensus on its definition and, more importantly, on the way it should be measured. Fortunately, there is a growing research agenda and more financial regulators, central bankers, and academics have recently been focusing on this field. In this chapter, the authors obtain a distribution of losses for the banking system as a whole. They are convinced that such distribution of losses is the key element that could be used to develop relevant measures for systemic risk. Their model contemplates several aspects, which they consider important regarding the concept of systemic risk: an initial macroeconomic shock, which weakens some institutions (some of them to the point of failure), a contagion process by means of the interbank market, and the resulting losses to the financial system as a whole. Finally, once the distribution is estimated, the authors derive standard risk measures for the system as a whole, focusing on the tail of the distribution (where the catastrophic or systemic events are located). By using the proposed framework, it is also possible to perform stress testing in a coherent way, including second round effects like contagion through the interbank market. Additionally, it is possible to follow the evolution of certain coherent risk measures, like the CVaR, in order to evaluate if the system is becoming more or less risky, in fact, more or less fragile. Additionally, the authors decompose the distribution of losses of the whole banking system into the systemic and the contagion elements and determine if the system is more prone to experience contagious difficulties during a certain period of time.

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