Systemic Contingent Claims Analysis – Estimating Market-Implied Systemic Risk

 
Author/Editor: Jobst, Andreas A. ; Gray, Dale
 
Publication Date: February 27, 2013
 
Electronic Access: Free Full text (PDF file size is 3,254KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: The recent global financial crisis has forced a re-examination of risk transmission in the financial sector and how it affects financial stability. Current macroprudential policy and surveillance (MPS) efforts are aimed establishing a regulatory framework that helps mitigate the risk from systemic linkages with a view towards enhancing the resilience of the financial sector. This paper presents a forward-looking framework ("Systemic CCA") to measure systemic solvency risk based on market-implied expected losses of financial institutions with practical applications for the financial sector risk management and the system-wide capital assessment in top-down stress testing. The suggested approach uses advanced contingent claims analysis (CCA) to generate aggregate estimates of the joint default risk of multiple institutions as a conditional tail expectation using multivariate extreme value theory (EVT). In addition, the framework also helps quantify the individual contributions to systemic risk and contingent liabilities of the financial sector during times of stress.
 
Series: Working Paper No. 13/54
Subject(s): Financial sector | Financial institutions | Banks | Risk management

 
English
Publication Date: February 27, 2013
ISBN/ISSN: 9781475572780/2227-8885 Format: Paper
Stock No: WPIEA2013054 Pages: 93
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
Please address any questions about this title to publications@imf.org