Quantifying Systemic Risk

Quantifying Systemic Risk

Joseph G. Haubrich and Andrew W. Lo

Print publication date: 2013

ISBN: 9780226319285

Publisher: University of Chicago Press

Abstract

In the aftermath of the recent financial crisis, the federal government has pursued significant regulatory reforms, including proposals to measure and monitor systemic risk. However, there is much debate about how this might be accomplished quantitatively and objectively—and whether this is even possible. A key issue is determining the appropriate trade-offs between risk and reward from a policy and social welfare perspective given the potential negative impact of crises. This book addresses the challenges of measuring statistical risk from a system-wide perspective. It looks at the means of measuring systemic risk and explores alternative approaches. Among the topics discussed are the challenges of tying regulations to specific quantitative measures, the effects of learning and adaptation on the evolution of the market, and the distinction between the shocks that start a crisis and the mechanisms that enable it to grow.

Table of Contents

Introduction

Joseph G. HaubrichAndrew W. Lo

1 Liquidity Risk, Cash Flow Constraints, and Systemic Feedbacks

Sujit Kapadia Mathias Drehmann John Elliott Gabriel Sterne

2 Endogenous and Systemic Risk

Jon Danielsson Hyun Song Shin Jean-Pierre Zigrand

3 Systemic Risks and the Macroeconomy

Gianni De NicolòMarcella Lucchetta

4 Hedge Fund Tail Risk

Tobias Adrian Markus K. Brunnermeier Hoai-Luu Q. Nguyen

5 How to Calculate Systemic Risk Surcharges

Viral V. Acharya Lasse H. Pedersen Thomas Philippon Matthew Richardson