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SUMMARY:System-wide risk and systemic importance: an incomplete review of 
 metrics and data - Tarashev\, N (Bank for International Settlements)
DTSTART:20140925T130000Z
DTEND:20140925T134500Z
UID:TALK54516@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:I. Two major competing types of systemic-risk metrics are: (i)
  quantiles\, e.g. VaR\; and (ii) tail expectations\, e.g. expected shortfa
 ll (ES). I.a. The choice of a risk metric is often motivated with: (i) pro
 perties of the metrics estimator\; (ii) computational convenience. But dif
 ferent metrics correspond to different economic concepts and thus to diffe
 rent policy objectives (e.g. to reduce system-wide risk vs. to build a war
  chest for a systemic crisis). Similar tension between alternative metrics
  exists in an investment portfolio context. \n\nI.b. Given a metric for sy
 stem-wide risk\, the Shapley value offers a convenient prism for comparing
  alternative measures of the systemic importance of individual institution
 s. It also allows for deriving important properties of these measures and 
 for identifying the policy contexts in which they should be used. \n\nI.c.
  There is a subtle difference between the impact of an institution on syst
 em-wide risk and the presence of an institution in systemic events. Ignori
 ng this difference could lead to grossly misleading conclusions as regards
  systemic importance. \n\nII. Data availability shapes existing approaches
  to measuring system-wide risk and systemic importance. One approach build
 s on a structural model of system-wide risk and relies on balance sheet da
 ta and commercial vendors estimates of individual riskiness. Another appro
 ach builds on reduced-form models and relies on market-price data. \n\nII.
 a. The first approach has revealed a material impact of the system's netwo
 rk structure on system-wide risk and the systemic importance of individual
  institutions. The scarcity of real-world data on such structures is thus 
 a major problem in practical applications. II.b. The second approach makes
  it possible to study tail interdependence across institutions. Tools base
 d on extreme-value theory deliver estimates of such interdependence\, whic
 h contributes materially to measures of systemic importance.\n\nRelated Li
 nks: \nhttp://www.sciencedirect.com/science/article/pii/S1042957313000326 
 - "Measuring the systemic importance of interconnected banks" \nhttp://www
 .bis.org/publ/work308.htm - "Attributing systemic risk to individual insti
 tutions" \nhttp://www.bis.org/publ/qtrpdf/r_qt1306g.htm - "Looking at the 
 tail: price-based measures of systemic importance" \n
LOCATION:Seminar Room 1\, Newton Institute
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