Systemic Risk


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Systemic Risk

Risk common to a particular sector or country. Often refers to a risk resulting from a particular "system" that is in place, such as the regulator framework for monitoring of financial_institutions.

Systemic Risk

A risk that is carried by an entire class of assets and/or liabilities. Systemic risk may apply to a certain country or industry, or to the entire global economy. It is impossible to reduce systemic risk for the global economy (complete global shutdown is always theoretically possible), but one may mitigate other forms of systemic risk by buying different kinds of securities and/or by buying in different industries. For example, oil companies have the systemic risk that they will drill up all the oil in the world; an investor may mitigate this risk by investing in both oil companies and companies having nothing to do with oil. Systemic risk is also called systematic risk or undiversifiable risk.
References in periodicals archive ?
The financial sector, because it now is responsible for the potential cost of all the systemic risk in the market, must produce 18% returns.
5 trillion, with no end in sight of reckless fiscal spending, should be a concern for systemic risk monitors.
Despite the broad recognition that reinsurance interconnectedness may be a source of systemic risk in the insurance industry, little empirical work has been done to measure the extent of interconnectedness among insurers and reinsurers and to test the significance of this interconnectedness for systemic risk.
But even if one were to assume away the distinction between risk and uncertainty, the central management of systemic risk is procedurally misguided.
Before the policy measures are imposed on the few designated G-SIIs, we urge a careful re-evaluation of the systemic risk issue in the context of U.
Systemic risk is the risk of collapse of an entire system or entire market, exacerbated by links and interdependencies; with systemic risk, the failure of a single entity or duster of entities can cause a cascading failure.
Using value-at-risk (VaR) to access assets, it seems negligible to capture the systemic risk and the true risk is often underestimated when other assets come under stress.
Among the many concerns addressed in the Plan was systemic risk in financial systems: "Authorities should monitor substantial changes in asset prices and their implications for the macro-economy and the financial system" (G20 2008, 3).
Despite LCH's success in decreasing systemic risk during the
Modern systemic risk analysis consists of many tools that are applied by central banks and supervisory authorities as well as macroprudential supervisory bodies at the national and international level such as the European Systemic Risk Board and the Financial Supervision Board.
Summary: The New York Fed brought together leading financial researchers to review the latest analysis on systemic risk in global banking
When the bank has many trades on the clearinghouse's books, the clearinghouse is fine if these trades net out to about zero; systemic risk, regulators insist, is thereby reduced, because the financial system needn't worry about collecting the debts, one-by-one.

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