Systemic Risk: The Impact of COVID-19

2020 ◽  
Author(s):  
Muhammad Suhail Rizwan ◽  
Ghufran Ahmad ◽  
Dawood Ashraf
Keyword(s):  
Systemic Risk ◽  
The Impact

Global Algorithmic Capital Markets

2018 ◽  
Keyword(s):  
Public Policy ◽  
Capital Markets ◽  
Systemic Risk ◽  
High Frequency ◽  
Investor Protection ◽  
High Frequency Trading ◽  
Market Making ◽  
Market Governance ◽  
Policy Objectives ◽  
The Impact

This book illustrates and assesses the dramatic recent transformations in capital markets worldwide and the impact of those transformations. ‘Market making’ by humans in centralized markets has been replaced by supercomputers and algorithmic high frequency trading operating in often highly fragmented markets. How do recent market changes impact on core public policy objectives such as investor protection, reduction of systemic risk, fairness, efficiency, and transparency in markets? The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators sheds light on these and related questions and discusses ways to strengthen market governance for the benefit of society at large.

Impact of regulatory announcements on systemic risk in the Indian telecom sector

2018 ◽  
Vol 13 (5) ◽  
pp. 1395-1416 ◽  
Author(s):  
Sushma Priyadarsini Yalla ◽  
Som Sekhar Bhattacharyya ◽  
Karuna Jain
Keyword(s):  
Risk Premium ◽  
Systemic Risk ◽  
Service Providers ◽  
Policy Makers ◽  
Content Type ◽  
Risk Premiums ◽  
Buffering Hypothesis ◽  
Research Findings ◽  
Telecom Sector ◽  
The Impact

Purpose Post 1991, given the advent of liberalization and economic reforms, the Indian telecom sector witnessed a remarkable growth in terms of subscriber base and reduced competitive tariff among the service providers. The purpose of this paper is to estimate the impact of regulatory announcements on systemic risk among the Indian telecom firms. Design/methodology/approach This study employed a two-step methodology to measure the impact of regulatory announcements on systemic risk. In the first step, CAPM along with the Kalman filter was used to estimate the daily β (systemic risk). In the second step, event study methodology was used to assess the impact of regulatory announcements on daily β derived from the first step. Findings The results of this study indicate that regulatory announcements did impact systemic risk among telecom firms. The study also found that regulatory announcements either increased or decreased systemic risk, depending upon the type of regulatory announcements. Further, this study estimated the market-perceived regulatory risk premiums for individual telecom firms. Research limitations/implications The regulatory risk premium was either positive or negative, depending upon the different types of regulatory announcements for the telecom sector firms. Thus, this study contributes to the theory of literature by testing the buffering hypothesis in the context of Indian telecom firms. Practical implications The study findings will be useful for investors and policy-makers to estimate the regulatory risk premium as and when there is an anticipated regulatory announcement in the Indian telecom sector. Originality/value This is one of the first research studies in exploring regulatory risk among the Indian telecom firms. The research findings indicate that regulatory risk does exist in the telecom firms of India.

scholarly journals An Integrated Global Food and Energy Security System Dynamics Model for Addressing Systemic Risk

2019 ◽  
Vol 11 (14) ◽  
pp. 3995 ◽  
Author(s):  
Roberto Pasqualino ◽  
Irene Monasterolo ◽  
Aled Jones
Keyword(s):  
Food Security ◽  
Population Growth ◽  
System Dynamics ◽  
Systemic Risk ◽  
Land Development ◽  
Climate Extreme ◽  
System Dynamics Model ◽  
Dynamics Model ◽  
The Impact ◽  
Global Food

In 1972, The Limits to Growth, using the World3 System Dynamics model, modeled for the first time the long-term risk of food security, which would emerge from the complex relation between capital and population growth within the limits of the planet. In this paper, we present a novel system dynamics model to explore the short-term dynamics of the food and energy system within the wider global economic framework. By merging structures of the World3, Money, and Macroeconomy Dynamics (MMD) and the Energy Transition and the Economy (ETE) models, we present a closed system global economy model, where growth is driven by population growth and government debt. The agricultural sector is a general disequilibrium productive sector grounded on World3, where capital investment and land development decisions are made to meet population food need, thus generating cascade demands for the energy and capital sector. Energy and Capital Sectors employ a more standard economic approach in line with MMD and ETE. By taking into account the role of financial, real, and natural capital, the model can be used to explore alternative scenarios driven by uncertainty and risk, such as climate extreme events and their impacts on food production. The paper presents scenario analysis of the impact of an exogenous price, production, and subsidies shock in the food and/or energy dimensions on the economic system, understanding the sources of potential cascade effects, thus providing a systemic risk assessment tool to inform global food security policies.

scholarly journals Bank regulation and systemic risk: cross country evidence

2020 ◽  
Author(s):  
Lei Chen ◽  
Hui Li ◽  
Frank Hong Liu ◽  
Yue Zhou
Keyword(s):  
Systemic Risk ◽  
Bank Regulation ◽  
Activity Restriction ◽  
Instrumental Variable Analysis ◽  
Regulation And Supervision ◽  
Marginal Expected Shortfall ◽  
Bank Regulation And Supervision ◽  
Cross Country ◽  
Using Data ◽  
The Impact

AbstractUsing data for banks from 65 countries for the period 2001–2013, we investigate the impact of bank regulation and supervision on individual banks’ systemic risk. Our cross-country empirical findings show that bank activity restriction, initial capital stringency and prompt corrective action are all positively related to systemic risk, measured by Marginal Expected Shortfall. We use the staggered timing of the implementation of Basel II regulation across countries as an exogenous event and use latitude for instrumental variable analysis to alleviate the endogeneity concern. Our results also hold for various robustness tests. We further find that the level of equity banks can alleviate such effect, while bank size is likely to enhance the effect, supporting our conjecture that the impact of bank regulation and supervision on systemic risk is through bank’s capital shortfall. Our results do not argue against bank regulation, but rather focus on the design and implementation of regulation.

The Impact of Sovereign Shocks

2020 ◽  
Vol 66 (7) ◽  
pp. 3113-3132
Author(s):  
Gerardo Manzo ◽  
Antonio Picca
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Dynamic Propagation ◽  
Novel Approach ◽  
Shock Transmission ◽  
The Impact

This paper studies the dynamic propagation mechanisms of systemic risk shocks within and across macrosystems of governments and financial institutions. We propose a novel approach to identify relevant systemic shocks and to classify them into sovereign or banking categories. We find that sovereign shocks have a significant and persistent impact on the probability of a collective banking default. We also explore channels through which these shocks propagate and identify how sovereign fiscal fragility and banking exposure are relevant mechanisms of shock transmission. This paper was accepted by Gustavo Manso, finance.

scholarly journals Macroprudential Policy in a Heterogeneous Environment—An Application of Agent-Based Approach in Systemic Risk Modelling

Entropy ◽  
2020 ◽  
Vol 22 (2) ◽  
pp. 129
Author(s):  
Jagoda Kaszowska-Mojsa ◽  
Mateusz Pipień
Keyword(s):  
Systemic Risk ◽  
Financial Distress ◽  
Dynamic Stochastic General Equilibrium ◽  
Macroprudential Policy ◽  
Risk Modelling ◽  
Agent Based ◽  
Macroprudential Policies ◽  
Dynamic Stochastic ◽  
Rbc Models ◽  
The Impact

Assessment of welfare effects of macroprudential policy seems the most important application of the Dynamic Stochastic General Equilibrium (DSGE) framework of macro-modelling. In particular, the DSGE-3D model, with three layers of default (3D), was developed and used by the European Systemic Risk Board and European Central Bank as a reference tool to formally model the financial cycle as well as to analyze effects of macroprudential policies. Despite the extreme importance of incorporating financial constraints in Real Business Cycle (RBC) models, the resulting DSGE-3D construct still embraces the representative agent idea, making serious analyses of diversity of economic entities impossible. In this paper, we present an alternative to DSGE modelling that seriously departs from the assumption of the representativeness of agents. Within an Agent Based Modelling (ABM) framework, we build an environment suitable for performing counterfactual simulations of the impact of macroprudential policy on the economy, financial system and society. We contribute to the existing literature by presenting an ABM model with broad insight into heterogeneity of agents. We show the stabilizing effects of macroprudential policies in the case of economic or financial distress.

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