An analytic environment for systemic risk — Risk modeling support for financial policy makers

2012 ◽  
Author(s):  
Charles A. Worrell
Keyword(s):  
Systemic Risk ◽  
Financial Policy ◽  
Risk Modeling ◽  
Policy Makers

Impact of regulatory announcements on systemic risk in the Indian telecom sector

2018 ◽  
Vol 13 (5) ◽  
pp. 1395-1416 ◽  
Author(s):  
Sushma Priyadarsini Yalla ◽  
Som Sekhar Bhattacharyya ◽  
Karuna Jain
Keyword(s):  
Risk Premium ◽  
Systemic Risk ◽  
Service Providers ◽  
Policy Makers ◽  
Content Type ◽  
Risk Premiums ◽  
Buffering Hypothesis ◽  
Research Findings ◽  
Telecom Sector ◽  
The Impact

Purpose Post 1991, given the advent of liberalization and economic reforms, the Indian telecom sector witnessed a remarkable growth in terms of subscriber base and reduced competitive tariff among the service providers. The purpose of this paper is to estimate the impact of regulatory announcements on systemic risk among the Indian telecom firms. Design/methodology/approach This study employed a two-step methodology to measure the impact of regulatory announcements on systemic risk. In the first step, CAPM along with the Kalman filter was used to estimate the daily β (systemic risk). In the second step, event study methodology was used to assess the impact of regulatory announcements on daily β derived from the first step. Findings The results of this study indicate that regulatory announcements did impact systemic risk among telecom firms. The study also found that regulatory announcements either increased or decreased systemic risk, depending upon the type of regulatory announcements. Further, this study estimated the market-perceived regulatory risk premiums for individual telecom firms. Research limitations/implications The regulatory risk premium was either positive or negative, depending upon the different types of regulatory announcements for the telecom sector firms. Thus, this study contributes to the theory of literature by testing the buffering hypothesis in the context of Indian telecom firms. Practical implications The study findings will be useful for investors and policy-makers to estimate the regulatory risk premium as and when there is an anticipated regulatory announcement in the Indian telecom sector. Originality/value This is one of the first research studies in exploring regulatory risk among the Indian telecom firms. The research findings indicate that regulatory risk does exist in the telecom firms of India.

scholarly journals Financial Stability Indicators – The Case of Croatia

2016 ◽  
Vol 5 (1) ◽  
pp. 113-140 ◽  
Author(s):  
Mirna Dumičić
Keyword(s):  
Principal Component Analysis ◽  
Systemic Risk ◽  
Financial Stability ◽  
Principal Component ◽  
Small Open Economies ◽  
Macroprudential Policy ◽  
Policy Makers ◽  
The Public ◽  
Systemic Risks ◽  
Accumulation Index

Abstract This paper considers financial stability through the processes of accumulation and materialisation of systemic risks. To this end, the method of principal component analysis on the example of Croatia has been used to construct two composite indicators – a systemic risk accumulation index and an index reflecting the consequences of systemic risk materialisation. In the construction of the indices, the features and risks specific to small open economies were considered. Such an approach to systemic risk analysis facilitates the monitoring and understanding of the degree of financial stability and communication of macroprudential policy makers with the public.

scholarly journals Systemic Risk Modeling

2020 ◽  
Vol 20 (54) ◽  
Author(s):  
Raphael Espinoza ◽  
Miguel Segoviano ◽  
Ji Yan
Keyword(s):  
Theoretical Model ◽  
Empirical Model ◽  
Systemic Risk ◽  
Empirical Models ◽  
Equity Returns ◽  
Counterparty Risk ◽  
Risk Modeling ◽  
Cross Sectional ◽  
Fire Sales ◽  
Multivariate Density

We propose a framework to link empirical models of systemic risk to theoretical network/ general equilibrium models used to understand the channels of transmission of systemic risk. The theoretical model allows for systemic risk due to interbank counterparty risk, common asset exposures/fire sales, and a “Minsky" cycle of optimism. The empirical model uses stock market and CDS spreads data to estimate a multivariate density of equity returns and to compute the expected equity return for each bank, conditional on a bad macro-outcome. Theses “cross-sectional" moments are used to re-calibrate the theoretical model and estimate the importance of the Minsky cycle of optimism in driving systemic risk.

scholarly journals Determinants of Systematic Risk : Empirical Evidence from Shariah Compliants Firms Listed on Bursa Malaysia

2020 ◽  
Vol 13 (1) ◽  
pp. 71-82
Author(s):  
Mohamad Nizam Jaafar ◽  
Amirul Afif Muhamat ◽  
Mohd Faizal Basri ◽  
Sharifah Faigah Syed Alwi
Keyword(s):  
Systemic Risk ◽  
Fixed Effects ◽  
Systematic Risk ◽  
Main Concern ◽  
Fixed Effects Model ◽  
Policy Makers ◽  
Growth Firms ◽  
Relationship Of ◽  
The Relationship ◽  
Business Philosophy

This paper is aimed at advancing empirical indications on micro variable factors determining systematic risk in Shariah complaints firms listed on Bursa Malaysia. This paper also attempts to identify whether the Shariah compliant firms are showing the same micro variables factors that determine systemic risk. The systematic issues have become the main concern to many related parties such as policy makers, investors and stakeholders as systematic risk is unable to be removed through diversification. Shariah compliant firms have their own unique systematic risk owing to their difference in business philosophy. A hypothesis between the relationship of the firms-specific micro variable factors and systemic risk are established on foregoing studies and theoretical framework respectively, and analyzed using the Fixed Effects Model tested on the data from 80 listed companies covering a period from 2009 to 2018. The results show that leverage and growth are the most significant factors of the systematic risk of Shariah compliant firms. Therefore, high leverage and growth firms are considered to be high risk for investment in Malaysia capital market.

scholarly journals Analysis of the systemic credit risk component in the banking sector of the Republic of Serbia

2021 ◽  
Vol 69 (3-4) ◽  
pp. 65-79
Author(s):  
Svetlana Drljača-Kanazir
Keyword(s):  
Credit Risk ◽  
Systemic Risk ◽  
Banking Sector ◽  
Small Sample ◽  
Risk Exposure ◽  
Loan Portfolio ◽  
Policy Makers ◽  
Significant Difference ◽  
The Republic ◽  
Macroeconomic Aggregates

The subject of this research paper is quantification of the degree of systemic risk exposure of the Serbian banking sector's loan portfolio in the period from 2008Q4 to 2019Q3, including by main commercial segments (corporate and retail). The Basel Committee on Banking Supervision, under its regulatory framework, makes a distinction between corporate and retail loans regarding the exposure to systemic risk. Based on the above, the following hypotheses are set: a) There is a significant difference in systemic risk exposure between corporate and retail loans in the Serbian banking sector and b) Forecasting the exposure to systemic risk of the entire Serbian banking sector can be performed on the basis of corporate loans due to the specificity of the economic system of the Republic of Serbia. The results of the research corroborated the truthfulness of both hypotheses, which has a multifold significance for commercial banks' management, macroeconomic and macroprudential policy makers. First, banking and accounting regulations require stress-testing of probability of default on the change in macroeconomic aggregates and its impact on the bank's capital. Second, a bank's sensitivity to changes in macroeconomic aggregates predominantly depends on the loan portfolio structure by commercial segments. Third, the conclusion of the academic elite that the development of the capital market would lead to an increase in the macroeconomic stability of the Republic of Serbia and reduce the procyclicality of credit risk was confirmed. We used the autoregressive distributed lags model (ARDL model) because there is a difference in order of integration in the observed time series (I(0) and I(1)), and because this method provides good results for relatively small sample data sizes.

Introduction

2020 ◽  
pp. 1-20
Author(s):  
Michael Schiltz
Keyword(s):  
Transaction Cost ◽  
Sovereign Debt ◽  
Network Effects ◽  
International Monetary System ◽  
Late Nineteenth Century ◽  
Financial Policy ◽  
Policy Makers ◽  
Monetary System ◽  
Long Run ◽  
Currency Competition

This chapter lays out the conceptual framework needed to grasp the challenges facing exchange bankers in late nineteenth-century Asia. It borrows from the transaction cost literature underlying the study of the structure of the international monetary system; and it subscribes to the notion that such structure is the product of international currency competition. In the historical literature, applications of these insights are surprisingly scarce. Yet it is demonstrated that, by (1) settling on the existence of a distinction between ‘center’ and ‘periphery’ and (2) the existence of ‘network effects’, the transaction cost approach may explain the persistence of monetary arrangements in the long run. Remarkably, seemingly ‘retreating’ currencies retain a degree of superiority that would not be warranted in case network effects were absent; vice versa, non-liquid currencies have only a very small chance at climbing the ladder of currency prestige—they are structurally disadvantaged. It is argued that the distinction between center and periphery is real, not just analytical, and has had tangible implications for monetary and financial policy makers in the fields of sovereign debt and trade finance.

scholarly journals Measurement of Systemic Risk in Global Financial Markets and Its Application in Forecasting Trading Decisions

2020 ◽  
Vol 12 (10) ◽  
pp. 4000 ◽  
Author(s):  
Jianxu Liu ◽  
Quanrui Song ◽  
Yang Qi ◽  
Sanzidur Rahman ◽  
Songsak Sriboonchitta
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Decision Model ◽  
Global Financial Crisis ◽  
Joint Models ◽  
Policy Makers ◽  
Trading Decisions ◽  
The Global Financial Crisis ◽  
First Time

The global financial crisis in 2008 spurred the need to study systemic risk in financial markets, which is of interest to both academics and practitioners alike. We first aimed to measure and forecast systemic risk in global financial markets and then to construct a trade decision model for investors and financial institutions to assist them in forecasting risk and potential returns based on the results of the analysis of systemic risk. The factor copula-generalized autoregressive conditional heteroskedasticity (GARCH) models and component expected shortfall (CES) were combined for the first time in this study to measure systemic risk and the contribution of individual countries to global systemic risk in global financial markets. The use of factor copula-based models enabled the estimation of joint models in stages, thereby considerably reducing computational burden. A high-dimensional dataset of daily stock market indices of 43 countries covering the period 2003 to 2019 was used to represent global financial markets. The CES portfolios developed in this study, based on the forecasting results of systemic risk, not only allow spreading of systemic risk but may also enable investors and financial institutions to make profits. The main policy implication of our study is that forecasting systemic risk of global financial markets and developing portfolios can provide valuable insights for financial institutions and policy makers to diversify portfolios and spread risk for future investments and trade.

Systemic Risk in Financial Services

2011 ◽  
Vol 16 (2) ◽  
pp. 195-300 ◽  
Author(s):  
D. Besar ◽  
P. Booth ◽  
K. K. Chan ◽  
A. K. L. Milne ◽  
J. Pickles
Keyword(s):  
Financial Markets ◽  
Systemic Risk ◽  
Financial Services ◽  
Financial Crises ◽  
Financial System ◽  
Policy Makers ◽  
Large Aggregate ◽  
The Past ◽  
Markets And Institutions ◽  
Aggregate System

AbstractThe current banking crisis has reminded us of how risks materialising in one part of the financial system can have a widespread impact, affecting other financial markets and institutions and the broader economy. This paper, prepared on behalf of the Actuarial Profession, examines how such events have an impact on the entire financial system and explores whether such disturbances may arise within the insurance and pensions sectors as well as within banking. The paper seeks to provide an overview of a number of banking and other financial crises which have occurred in the past, illustrated by four case studies. It discusses what constitutes asystemicevent and what distinguishes it from a large aggregate system wide shock. Finally, it discusses how policy-makers can respond to the risk of such systemic financial failures.

scholarly journals Impact of Bank Specific and Macroeconomic Factors on Banks Profitability: A Study on Banking Sector of Pakistan

2015 ◽  
Vol 1 (2) ◽  
pp. 99-110
Author(s):  
Qaisar Maqbool Khan ◽  
Rehana Kauser ◽  
Ulfat Abbas
Keyword(s):  
Random Effects ◽  
Banking Sector ◽  
Random Effect ◽  
Financial Policy ◽  
Lagrangian Multiplier ◽  
Macroeconomic Factors ◽  
Policy Makers ◽  
Spread Ratio ◽  
Relationship Of ◽  
The Relationship

This research focuses and examines the association among profitability of banks, along with bank specific and macroeconomic factors of Pakistan. With the help of financial data of thirty-two Pakistani banks over the period of 2011-2015. Pooled OLS (POLS)/Random Effect, Breusch and Pagan Lagrangian Multiplier Test for Random Effects estimations and Hausman Test for Fixed vs Random effects estimations used for further empirical analysis and interpretations. Further to explore the relationship of profitability indicator ROA along with Earning per Share (EPS), SIZE, Cash Equivalents, Spread Ratio and Capital Ratio as bank specific (banking/microeconomic indicators), while on the other hand Inflation, Interest Rate and GDP as external macroeconomic factors. Statistical results to this study established confirmation that EPS, SIZE, Capital Ratio and GDP have a significant impact on the ROA of banking sector in Pakistan. The calculated results of the study are of worthy to mutually academics and banking financial policy makers.

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