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A Theoretical and Empirical Comparison of Systemic Risk MeasuresSylvain BenoitUniversity of Orleans Gilbert ColletazUniversity of Orleans Christophe HurlinUniversity of Orleans; Université Paris IX Dauphine Christophe PerignonHEC Paris - Finance Department February 14, 2013 Abstract: We propose a theoretical and empirical comparison of the most popular systemic risk measures. To do so, we derive the systemic risk measures in a common framework and show that they can be expressed as linear transformations of market risk (e.g., beta). We also derive conditions under which the different measures lead similar rankings of systemically important financial institutions (SIFIs). In an empirical analysis of US financial institutions, we show that (1) different systemic risk measures identify different SIFIs and that (2) firm rankings based on systemic risk estimates mirror rankings obtained by sorting firms on market risk or liabilities. One-factor linear models explain most of the variability of the systemic risk estimates, which indicates that standard systemic risk measures fall short in capturing the multiple facets of systemic risk.
Number of Pages in PDF File: 42 Keywords: Banking Regulation, Systemically Important Financial Firms, Marginal Expected Shortfall, SRISK, CoVaR, Systemic vs. Systematic Risk JEL Classification: G01, G32 working papers seriesDate posted: December 21, 2011 ; Last revised: March 14, 2013Suggested CitationContact Information
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