Estimating SRISK for Latin America

35 Pages Posted: 19 Apr 2023

See all articles by Robert F. Engle

Robert F. Engle

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); New York University (NYU) - Volatility and Risk Institute

Hyeyoon Jung

Federal Reserve Bank of New York

Date Written: March 7, 2023

Abstract

The expected capital shortfall of a financial entity conditional on a prolonged market decline, SRISK measure of Brownlees and Engle (2017), is a useful monitor of financial fragility. The key challenge in applying SRISK is that it requires data on the market value of firm equity. However, many of the major financial institutions in Latin America are not publicly listed and therefore do not have market data on firm equity. To get a full picture of financial fragility, it is crucial to estimate SRISK for unlisted firms as well. To this end, we estimate SRISK for unlisted Latin American financial institutions by examining the relation between accounting data and market data for listed banks and then applying the same relation to unlisted firms.

Suggested Citation

Engle, Robert F. and Jung, Hyeyoon, Estimating SRISK for Latin America (March 7, 2023). Available at SSRN: https://ssrn.com/abstract=4381427 or http://dx.doi.org/10.2139/ssrn.4381427

Robert F. Engle (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Volatility and Risk Institute ( email )

44 West 4th Street
New York, NY 10012
United States

Hyeyoon Jung

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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