Systemic risk contributions
Abstract: We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks' marginal contributions to the systemic risk. The methodology is applied using publicly available data to the 19 bank holding companies covered by the U.S. Supervisory Capital Assessment Program (SCAP), with the systemic risk indicator peaking around $1.1 trillion in March 2009. Our systemic risk contribution measure shows interesting similarity to and divergence from the SCAP expected loss measure. In general, we find that a bank's contribution to the systemic risk is roughly linear in its default probability but highly nonlinear with respect to institution size and asset correlation.
File(s): File format is text/html http://www.federalreserve.gov/pubs/feds/2011/201108/201108abs.html
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/feds/2011/201108/201108pap.pdf
Part of Series: Finance and Economics Discussion Series
Publication Date: 2011