Implied Risk Exposures

53 Pages Posted: 22 May 2013 Last revised: 8 Oct 2014

See all articles by Sylvain Benoit

Sylvain Benoit

Université Paris Dauphine - LEDa-SDFi

Christophe Hurlin

University of Orleans

Christophe Pérignon

HEC Paris - Finance Department

Date Written: October 1, 2014


We show how to reverse-engineer banks' risk disclosures, such as Value-at-Risk, to obtain an implied measure of their exposures to equity, interest rate, foreign exchange, and commodity risks. Factor Implied Risk Exposures (FIRE) are obtained by breaking down a change in risk disclosure into a market volatility component and a bank-specific risk exposure component. In a study of large US and international banks, we show that (1) changes in risk exposures are negatively correlated with market volatility and (2) changes in risk exposures are positively correlated across banks, which is consistent with banks exhibiting commonality in trading.

Keywords: Herding, Risk Disclosure, (Stressed) Value-at-Risk, Regulatory Capital

JEL Classification: G21, G28, G32

Suggested Citation

Benoit, Sylvain and Hurlin, Christophe and Pérignon, Christophe, Implied Risk Exposures (October 1, 2014). HEC Paris Research Paper No. FIN-2013-1012, Available at SSRN: or

Sylvain Benoit (Contact Author)

Université Paris Dauphine - LEDa-SDFi ( email )

Place du Maréchal de Lattre de Tassigny
Paris, Cedex 16 75775

Christophe Hurlin

University of Orleans ( email )

Université d'Orléans
Rue de Blois B.P. 6739 45

Christophe Pérignon

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

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