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Closed form solutions of measures of systemic risk

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  • Manfred Jaeger-Ambrozewicz

Abstract

This paper derives -- considering a Gaussian setting -- closed form solutions of the statistics that Adrian and Brunnermeier and Acharya et al. have suggested as measures of systemic risk to be attached to individual banks. The statistics equal the product of statistic specific Beta-coefficients with the mean corrected Value at Risk. Hence, the measures of systemic risks are closely related to well known concepts of financial economics. Another benefit of the analysis is that it is revealed how the concepts are related to each other. Also, it may be relatively easy to convince the regulators to consider a closed form solution, especially so if the statistics involved are well known and can easily be communicated to the financial community.

Suggested Citation

  • Manfred Jaeger-Ambrozewicz, 2012. "Closed form solutions of measures of systemic risk," Papers 1211.4173, arXiv.org.
    • Handle: RePEc:arx:papers:1211.4173
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    References listed on IDEAS

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    1. Viral V. Acharya & Lasse H. Pedersen & Thomas Philippon & Matthew Richardson, 2017. "Measuring Systemic Risk," The Review of Financial Studies, Society for Financial Studies, vol. 30(1), pages 2-47.
    2. Chen Zhou, 2010. "Are Banks Too Big to Fail? Measuring Systemic Importance of Financial Institutions," International Journal of Central Banking, International Journal of Central Banking, vol. 6(34), pages 205-250, December.
    3. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    4. Gabriele Galati & Richhild Moessner, 2013. "Macroprudential Policy – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 846-878, December.
    5. Martin Hellwig, 1995. "Systemic Aspects of Risk Management in Banking and Finance," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(IV), pages 723-737, December.
    6. repec:fip:fedhpr:y:2010:i:may:p:65-71 is not listed on IDEAS
    7. Céline Gauthier & Alfred Lehar & Moez Souissi, 2010. "Macroprudential Regulation and Systemic Capital Requirements," Staff Working Papers 10-4, Bank of Canada.
    8. Nikola Tarashev & Claudio Borio & Kostas Tsatsaronis, 2010. "Attributing systemic risk to individual institutions," BIS Working Papers 308, Bank for International Settlements.
    9. Mathias Drehmann & Nikola Tarashev, 2011. "Systemic importance: some simple indicators," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

    1. Castro, Carlos & Ferrari, Stijn, 2014. "Measuring and testing for the systemically important financial institutions," Journal of Empirical Finance, Elsevier, vol. 25(C), pages 1-14.

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