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Contribution Details

Type Master Thesis
Scope Discipline-based scholarship
Title Recent Developments in Measuring Systemic Risk
Organization Unit
Authors
  • Mathias Marzorati
Supervisors
  • Jean-Charles Rochet
Language
  • English
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Date November 2011
Abstract Text This work considers the important aspects that arose over the last three decades in relationship to the phenomenon of systemic risk. Initially, this vague concept is defined and specified, as well as a review of cases which evolved, or could have evolved, into a concrete systemic crisis is illustrated. For this purpose, the literature on qualitative and quantitative aspects of this particular problematic is surveyed. The main part of the work consists of an analysis of the sources that allow systemic risk to spread out within the financial system, causing repercussions even on the rest of the economy, touching several countries. The way the analysis is conducted refers, in a first step, to a theoretical illustration of these drivers, such as institution size and financial interlinkages. Given that, in the second step, the sources are linked to the organizations via empirical studies aimed at identifying the systemically important institutions, which would require a special supervision from a hypothetical "systemic" regulator. The presented academic papers both decompose the aggregate quantum of system-wide risk, but they adopt two different allocation procedures. These are the participation and the contribution approach, which based on their own concept of systemic relevance, lead to substantial differences in the results. Abstract This work considers the important aspects that arose over the last three decades in relationship to the phenomenon of systemic risk. Initially, this vague concept is defined and specified, as well as a review of cases which evolved, or could have evolved, into a concrete systemic crisis is illustrated. For this purpose, the literature on qualitative and quantitative aspects of this particular problematic is surveyed. The main part of the work consists of an analysis of the sources that allow systemic risk to spread out within the financial system, causing repercussions even on the rest of the economy, touching several countries. The way the analysis is conducted refers, in a first step, to a theoretical illustration of these drivers, such as institution size and financial interlinkages. Given that, in the second step, the sources are linked to the organizations via empirical studies aimed at identifying the systemically important institutions, which would require a special supervision from a hypothetical "systemic" regulator. The presented academic papers both decompose the aggregate quantum of system-wide risk, but they adopt two different allocation procedures. These are the participation and the contribution approach, which based on their own concept of systemic relevance, lead to substantial differences in the results.
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