Systemic Risk Assessment and Oversight (2nd edition)
First published:
ISBN: 9781782724155
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The Portfolio-based Approach to Systemic Risk
Preface
Why Systemic Risk Oversight Matters
The Bottom-up Approach to Systemic Risk
Fundamental Information and Firm-level Risk
Extracting Risk Measures from Credit Derivatives and Bonds
Equity-implied Methods and Risk-neutrality Transformations
Systemic Risk Measurement: Statistical Methods
CoRisk: Quantile Regressions in Practice
Balance-sheet Network Analysis
The Portfolio-based Approach to Systemic Risk
Advances in Modelling Systemic Risk in Financial Networks
Agent-based Models of the Financial System
The Regulation of Systemic Risk
The Effectiveness of Macroprudential Policy
Epilogue
References
Abbreviations
Test chapter
Financial crises impose large losses in the real economy, either directly from losses in the banking and financial sector, or indirectly from a decline in economic activity following the credit contraction in the aftermath of crises. For instance, the global financial crisis in 2008 led to losses in the banking sector of about US$1.3 trillion in the first half of 2009 (IMF, 2009a), while the global economy contracted by 1% in real terms in that year. The economic contraction could have been larger without the massive fiscal stimulus plans adopted by governments worldwide. Among the G20 economies, discretionary spending was estimated at 2% of GDP in 2009 (IMF, 2009b).
The high costs associated with financial crises raise concerns over whether the financial regulatory framework provides adequate safeguards to ensure the stability of the financial system. In particular, risks arise from the TBTF problem that prompted governments in advanced economies to support large financial firms during the global financial crisis in 2008/9. Firms regarded as TBTF tend to benefit from lower funding costs since counterparts factor in implicit government support (Ueda and Weder di Mauro, 2012). In
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