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 ?
Global Banking News-November 19, 2015--Russian official denies systemic risks in banking sector
The Butterfly Defect: How Globalization Creates Systemic Risks, and What To Do About It, by Ian Goldin and Mike Mariathasian, Princeton, NJ: Princeton University Press, 2014.
Specifically, the authors seek to determine whether insurers (banks) pose a statistically or economically significant source of systemic risks to banks (insurers).
In particular central clearing reduces risks in bilaterally negotiated products such as OTC derivatives and allows to mitigate systemic risks in these markets.
Technical matter The systemic risks in this case do not necessarily lie with an individual firm; rather, the issue is the way in which a particular market has come to operate.
More generally, in evaluating alternative approaches to mitigating systemic risks, regulators must aim to avoid stifling reasonable risk-taking and innovation in financial markets, as these factors play an important role in fostering broader productivity gains, economic growth, and job creation.
in addition to interest rates, the Federal Reserve has several policy instruments at its disposal to address systemic risks to the financial system.
economy, anticipation that the Fed will wind down its bond purchasing program, plus fewer systemic risks in the euro zone.
In some important ways, recent regulatory reforms have exacerbated problems of systemic risks through contagion.
Further, the differences, between VaR of sectors and sector-specific marginal systemic risks, were also compared.
The recent financial crisis underlined the importance of addressing systemic risks, which arose across institutions, markets and even countries.
Clearly, these tools are important and helpful in preventing and managing systemic risks.