Measuring Systemic Risk

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ID: 292018
2016
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Abstract
We present an economic model of systemic risk in which undercapitalization of the financial sector as a whole is assumed to harm the real economy, leading to a systemic risk externality. Each financial institution’s contribution to systemic risk can be measured as its systemic expected shortfall (SES), that is, its propensity to be undercapitalized when the system as a whole is undercapitalized. SES increases in the institution’s leverage and its marginal expected shortfall (MES), that is, its losses in the tail of the system’s loss distribution. We demonstrate empirically the ability of components of SES to predict emerging systemic risk during the financial crisis of 2007–2009.
Reference Key
openalex_W4230327943 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Viral V. Acharya, Lasse Heje Pedersen, Thomas Philippon, Matthew Richardson
Journal review of financial studies
Year 2016
DOI
10.1093/rfs/hhw088
URL
https://academic.oup.com/rfs/article-pdf/30/1/2/8601314/hhw088.pdf
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