Systemic Risk Measurement: Statistical Methods

Jorge A Chan-Lau

This book proposes a bottom-up approach for systemic risk measurement, building on risk assessment at the individual institution level and aggregating it at the system-wide level using credit risk portfolio techniques. This approach helps to develop economic intuition by focusing attention on the potential drivers of risk at the institution level, and on the linkages, either direct or indirect, that could amplify a negative shock and bring the financial system to a standstill.

However, in some cases it may suffice to construct simple systemic risk measures and indicators that do not necessarily involve extensive data gathering, too much data manipulation or applying theories of financial economics. These relatively simple statistical measures and indicators are useful for monitoring changes in systemic risk. For instance, the potential for shocks to spill over across different institutions could be captured by analysing changes in the correlations of their equity returns, the credit default swap spreads referencing them and/or the risk measures described in Chapters 3–5.

This chapter will describe a number of simple methods for constructing systemic risk measures and indicators

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here