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Topic: Systemic risk

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Market risk

Liquidity risk

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Operational risk

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Hedging

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Value at risk

Basel II

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Futures contract

	FRB: Speech--Mishkin, Systemic Risk and the International Lender of Last Resort --September 28, 2007
		When we speak of systemic risk, we mean the risk of a sudden, usually unexpected, disruption of information flows in financial markets that prevents them from channeling funds to those who have the most productive profit opportunities.
		Our understanding of the sources of systemic risk immediately suggests three general principles for operating as an effective lender of last resort: (1) restore confidence in the financial system by quickly providing liquidity, (2) limit moral hazard by encouraging adequate prudential supervision, and (3) act as a lender of last resort infrequently.
		The usual elements of a well-functioning prudential regulatory and supervisory system are adequate disclosure and capital requirements, limits on currency mismatch and connected lending, prompt corrective action, careful monitoring of an institution's risk-management procedures, close supervision of financial institutions to enforce compliance with regulations, and sufficient resources and accountability for supervisors.
	www.federalreserve.gov /newsevents/speech/mishkin20070928a.htm (3612 words)

	Systemic risk - Wikipedia, the free encyclopedia
		Systemic risk describes the likelihood of the collapse of a financial system, such as a general stock market crash or a joint breakdown of the banking system.
		Systemic risk should also be carefully distinguished from systematic risk, which describes risks which the whole economy faces such as business cycles or wars.
		Systematic risk is a risk of security that cannot be reduced through diversification.
	en.wikipedia.org /wiki/Systemic_risk (416 words)

	Section 2 - Impact of Netting on Credit, Liquidity and Systemic Risk
		Containing this aspect of systemic risk depends on both the netting provider and the participants being aware of the sources and extent of their exposures, on the strength of their incentives to contain these exposures and, ultimately, on their ability to absorb losses in the event of a default.
		Multilateral contract netting systems may be able to achieve similar results with respect to the value and volume of settlement payments and, at the same time, reduce the level of forward credit exposure on included foreign exchange transactions to a comparable extent.
		This reflected an assumption that all risks would be borne and managed by the central counterparty, as is the case in systems with "centralised" risk-management procedures similar to those employed by the clearing organisations associated with options and futures exchanges.
	riskinstitute.ch /141930.htm (3274 words)

	AEI - Events (Site not responding. Last check: 2007-10-17)
		In examining the issue of systemic risk, it is important to begin with a precise definition of what a systemic event is so that appropriate steps can be taken to minimize the threats that such events pose.
		Systemic events are shocks that begin within the financial sector and spread to the wider economy.
		Indeed risk is further posed by these institutions by their significant, on the order of 33 percent-mortgage-backed securities and the extent to which they are leveraged.
	www.aei.org /events/filter.economic,eventID.742/summary.asp (2125 words)

	Bank Failures, Systemic Risk, and Bank Regulation
		Systemic risk is perceived to occur because all economic agents are interconnected.
		Although systemic risk may exist without government regulation, on net, the probability of instability occurring in banking and the intensity of any resulting damage are likely to be greatly increased by some government policies adopted in the name of preventing systemic risk.
		[2] The public fear of systemic risk in the financial sector and in banking in particular is intensified both by its relative lack of understanding of financial matters and by a constant barrage of fictional "scare" stories.
	www.mega.nu:8080 /ampp/kaufman1.html (10138 words)

	3 - Banks, capital and the changing nature of international systemic risk
		The introduction of modern risk management techniques in relation to banks' credit portfolios is a comparatively recent development, but is already having a significant effect on the way that banks understand and manage their credit risk and capital.
		The second important development which affects any consideration of the appropriate regulatory approach to address international systemic risk is the fact that both the institutions and the types of risks which now characterise international financial markets are substantially different from those which existed at the time of the introduction of the 1988 Accord.
		However, these types of systemic event are materially different from a traditional banking type of systemic crisis because of the speed with which the problems impact the financial system as a result of the interrelationships between the different parties involved.
	riskinstitute.ch /147270.htm (1326 words)

	Columbia Business School - Securing a safety net against economic free fall
		Systemic risk occurs when there is a sudden, usually unexpected, event that disrupts financial markets, making them unable to channel funds effectively to those with the most productive investment opportunities.
		Such regulations, however, are not by themselves sufficient to limit systemic risk and ensure the health of financial institutions, because the institutions they attempt to regulate may try to avoid them.
		There is hope of improving the management of systemic risk, a task that should be a high priority for all those in the world of finance.
	www.gsb.columbia.edu /faculty/fmishkin.html (2484 words)

	Finance & Development, December 1999 - Financial Markets - Managing Global Finance and Risk
		Private risk management and prudential oversight of financial institutions can be improved, and incentives strengthened for depositors, creditors, counterparties, and investors to exercise greater control over the activities of financial institutions with which they have business relationships.
		Most current defenses against risk are premised on a limited definition of a systemic disturbance as an episode in which problems at one institution might cascade through payment systems, affect interbank relationships, lead to depositor runs, or infect other institutions to the point of posing risks for the financial system itself.
		Although this approach has worked reasonably well in limiting systemic damage from financial excesses, it may lead to conflicts between the objectives of regulators, who, by providing insurance, want to reduce systemic risks, and those of the regulated institutions, which have incentives to take greater risks within internal and regulatory capital constraints.
	www.imf.org /external/pubs/ft/fandd/1999/12/schinasi.htm (2779 words)

	Oral-Systemic Health (Site not responding. Last check: 2007-10-17)
		Because there are several common risk factors between oral and systemic diseases, and several limitations in the published studies, a careful interpretation of the literature is needed.
		Systemic activation of cytokines (group of low-molecular-weight proteins secreted by various cell types involved in coordinating antibody and T-cell immune interactions, and amplifying immune reactivity) in periodontal disease may contribute to respiratory inflammation in predisposed individuals.
		The systemic effect of antibiotic treatment of periodontal disease on glycemic control for diabetes is based on clinical trial results where patients have been randomly assigned to antibiotic therapy or a placebo group in addition to scaling and root planing.
	www.altcorp.com /AffinityLaboratory/oralsystemichealthpg.htm (5723 words)

	Abstract: SYSTEMIC RISK AND HEDGE FUNDS (Site not responding. Last check: 2007-10-17)
		Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial institutions—typically banks—that occur over a short period of time, often caused by a single major event.
		As a result, the risk exposures of the hedge-fund industry may have a material impact on the banking sector, resulting in new sources of systemic risks.
		In this paper, we attempt to quantify the potential impact of hedge funds on systemic risk by developing a number of new risk measures for hedge funds and applying them to individual and aggregate hedge-fund returns data.
	web.mit.edu /alo/www/Papers/systemic.html (236 words)

	Risk measurement and systemic risk
		Still, sound risk measurement is an indispensable tool for providing decision-makers with the quantitative information needed to better understand the inherent risks of alternative decisions and to underpin otherwise qualitative judgments.
		Not for no reason, therefore, is better risk measurement credited with having helped to enhance the resilience of the global financial system in the face of the many challenges encountered in recent years.
		Yet, the notion of “systemic risk” and the nature of the challenges posed in safeguarding financial stability have themselves been subject to change over time – indeed, the pursuit of this stability seems akin to “shooting at a moving target”.
	www.bis.org /speeches/sp051108.htm (2201 words)

	RGE - Risk of Systemic Crises and Asset Bubbles
		RGE - Risk of Systemic Crises and Asset Bubbles
		Nigeria, South Africa and the Rest of Africa
		Asia is Learning the Wrong Lessons from Its 1997-98 Financial Crisis: The Rising Risks of a New and Different Type of Financial Crisis in Asia
	www.rgemonitor.com /175 (516 words)

	The Systemic Risk Debate
		Systemic risk is an issue to which the Administration has devoted considerable attention.
		Moreover, in the context of the debate regarding the GSEs, systemic risk is routinely used as shorthand for the view that these institutions somehow present a special degree of risk to the U.S. financial system (or even the world's financial markets).
		Further, the nation's system for financing residential real estate mortgages is the envy of the world – as is shown by the investments in it from various sources around the globe.
	www.freddiemac.com /corporate/about/policy/reg_reform/systemic_risk_debate.html (944 words)

	[No title]
		At the outset, let me be clear on the meaning of systemic risk: it is the potential for the financial distress of a particular firm or group of firms to trigger broad spillover effects in financial markets, further triggering wrenching dislocations that affect broad economic performance.
		The core basis for our policy of reform is the systemic risk presented by the size of the GSEs' mortgage investment portfolios and the corresponding concentration of risk in these two federally-chartered enterprises.
		There are numerous levels of risk presented by the mortgage investment portfolios, but at a basic level the risk is created as follows: GSE portfolios are comprised primarily of fixed-rate mortgages, either held as whole loans, mortgage-backed securities (MBS), or other mortgage-related assets.
	www.ustreas.gov /press/releases/js4338.htm (2987 words)

	Periodontitis and systemic diseases
		Systemic risk factors recently have been identified by large epidemiologic studies using multifactorial statistical analyses to correct for confounding or associated co-risk factors.
		Risk factors which we know today as important include diabetes mellitus, especially in individuals in whom metabolic control is poor and cigarette smoking.
		These two risk factors markedly affect the initiation and progression of periodontitis and attempts to manage these factors are now an important component of prevention and treatment of adult periodontitis.
	ourworld.compuserve.com /homepages/perio-horizons/pg5.htm (825 words)

	Changes in the Structure of the U.S. Financial System and Implications for Systemic Risk - Federal Reserve Bank of New ... (Site not responding. Last check: 2007-10-17)
		And, because their overall risk profiles are likely to differ from banks, the greater importance of non-bank financial intermediaries, and of the capital markets more generally, offsets some of the potential concern associated with consolidation in the banking system.
		The systemically significant financial institutions are larger and stronger than in the past, but they are not invulnerable, and the impact of a failure would be greater.
		Here, because of their overall importance to the functioning of our financial system, we are working to encourage improvement in operational resilience, to ensure they meet the recently updated international standards for risk management and internal financial resources, and to strengthen the oversight framework.
	www.ny.frb.org /newsevents/speeches/2004/gei041001.html (3251 words)

	Investment Theory: Sample Capital Flow Analysis
		Market Risk refers to uncertainty regarding the future market value of securities due to variations in supply and demand that are not the result of changes in the intrinsic value of a security.
		Systemic risk is handled, in part, by Modern Portfolio Theory, a technique that reduces, but does not eliminate, market risk.
		By understanding the bias of systemic risk, it sometimes is possible to reduce the cost of hedging.
	www.capital-flow-analysis.com /investment-resources/analyses.html (1027 words)

	Systemic Research, Inc.
		Systemic Research reserves the right at its sole discretion to change, modify, add, or remove any portion of this Site or these Terms, in whole or in part, at any time and for any reason.
		Systemic Research has not reviewed all of the linked third party sites and does not control, and is not responsible for, any of these sites or their content.
		Systemic Research cannot and does not guarantee or warrant that any files available for downloading through this site will be free of infection or viruses, worms, Trojan horses or other malicious code that manifest contaminating or destructive properties.
	www.systemic.com /op/terms.cfm (901 words)

	The Greenspan Era: Lessons for the Future, Speech by Raghuram G. Rajan, Economic Counsellor and Director of the IMF's ...
		Since risk and return are related, when the manager conceals risk, it looks as if he outperforms peers given the risk he apparently takes.
		Typically, the kinds of risks that can most easily be concealed, given the requirement of periodic reporting, are "tail" risks-that is, risks that have a small probability of generating severe adverse consequences and, in exchange, offer generous compensation the rest of the time.
		As traditional risks such as mortgages or loans can be moved off bank balance sheets into the balance sheets of investment managers, banks have an incentive to originate more of these risks.
	www.imf.org /external/np/speeches/2005/082705.htm (3827 words)

	Part 9 Storm Tactics for The Perfect Financial Storm - Part III (Site not responding. Last check: 2007-10-17)
		The whole system is dependent on the active support of central banks in the area of liquidity management.
		The growth of derivatives made it possible to turn risk into a commodity that could be bought, sold, and restructured from the underlying asset.
		The amount of leverage in the global financial system and the degree to which it is interconnected has become a force that becomes magnified as it ripples through the world's financial system.
	www.financialsense.com /series2/tactics4/systemic.htm (3906 words)

	EXVaR Clearing: Counterpart Risk, Credit Risk, Clearing Risk management - Chosen By Paris Bourse for Real-time ...
		It allows the risk managers to be alerted when the exposure of the clearer to some client's potential losses exceeds limits.
		Accounts Default Risk is simulated with respect to Potential Future Exposure (involving open positions, risk factors volatility and correlation, user defined stress tests…) and a User-defined Rating which reflects the level of loss that implies a 50% default probability.
		Risk is measured by the Clearing Value-at-Risk() with quantiles up to 99.95% (decenial risk*), for a user-defined time horizon.
	software.clearingrisk.com /products3.htm (1013 words)

	RiskMetrics Group - Managing Risk - Lesson: Systemic risk
		Systemic risks, as opposed to unique or firm-specific risks, are the most troublesome because they have the potential to affect anyone.
		Systemic risks may arise from common factors (for example, market and economic factors, weather, natural disasters, computer viruses, war) and can influence the whole market's well-being.
		Unlike firm-specific risk, systemic risk cannot be diversified away — in fact, systemic risk is the residual risk when we have diversified away all specific risk.
	www.riskmetrics.com /courses/identifying_risk/systemicrisk.html (272 words)

	Systemic risk: prevention and cure
		Systemic risk is the term employed to convey a breakdown in the financial system, going beyond one company.
		When a payments crisis takes place, the integrity of the financial system is violated in the sense that people who have paid money fail to get their securities or people who have supplied securities fail to get funds.
		Systems are only tested in times of market volatility; short track--records of functioning under normal conditions should not generate confidence.
	www.mayin.org /ajayshah/MEDIA/1998/crises.html (1097 words)

	AION (risk factors) - Ophthalmology, The University of Iowa
		AION (risk factors) - Ophthalmology, The University of Iowa
		RISK FACTORS FOR DEVELOPMENT OF All the available evidence indicates that non-arteritic AION is multifactorial in nature and the risk factors fall into two main categories:
		It seems that the very potent arterial hypotensive drugs currently available to treat hypertension may be emerging as an important risk factor for arterial hypotension (particularly nocturnal hypotension), especially when used aggressively and/or given at bedtime.
	webeye.ophth.uiowa.edu /dept/AION/6-AION-risk.htm (1053 words)

	Nubank.com - Story Archive - What Is Systemic Risk And Do Bank Regulators Retard Or Contribute To It?
		One of the most feared events in banking is the cry of systemic risk.
		But unlike "fire," the term "systemic risk" is less clearly defined.
		Moreover, unlike fire fighters, who are rarely accused of sparking or spreading rather than extinguishing fires, bank regulators have at times been accused of, albeit unintentionally, contributing to rather than retarding systemic risk.
	www.nubank.com /stories/01-07-03_systemic-risk/index.html (220 words)

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