TY - JOUR
T1 - Measuring Systemic Risk
AU - Acharya, Viral V.
AU - Heje Pedersen, Lasse
AU - Philippon, Thomas
AU - Richardson, Matthew
PY - 2017/1
Y1 - 2017/1
N2 - 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.
AB - 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.
UR - https://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954925558503&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes
U2 - 10.1093/rfs/hhw088
DO - 10.1093/rfs/hhw088
M3 - Journal article
VL - 30
SP - 2
EP - 47
JO - Review of Financial Studies
JF - Review of Financial Studies
SN - 0893-9454
IS - 1
ER -