Systemic Risk : A Practitioner's Guide to Measurement, Management and Analysis.

Intro -- Systemic Risk -- Preface -- Acknowledgements -- Contents -- List of Figures -- List of Tables -- List of Boxes -- 1 Introduction -- References -- 2 Systemic Risk and the Financial System -- 2.1 Reasons for Adopting Broader Definitions of Systemic Risk -- 2.2 Reasons for Narrowing the Definition -- 2.3 Interconnectedness and Domino Effects -- 2.4 Hidden Vulnerabilities and Tsunamis -- 2.5 Systemic Risk and Political Risk -- 2.6 Systemic Risk and Societal Change -- 2.7 Financial Stability -- 2.8 Procyclicality -- 2.9 Macroprudential Policy -- 2.10 Key Takeaways -- References -- 3 Overall Features of the Financial System -- 3.1 What Predisposes the Financial System to Suffer from Systemic Risk? -- 3.1.1 Introduction -- 3.1.2 Too Big to Fail (TBTF) -- 3.1.3 The 'Domino' Model of Systemic Risk -- 3.1.4 The 'Tsunami' Model of Systemic Risk -- 3.1.5 The 'Combined' Model of Systemic Risk -- 3.1.6 Regulatory Forbearance -- 3.1.7 Viewing the 2007-09 Credit Crisis Through a 'Combined' Model Lens -- 3.1.8 Financial Services that are Critical to the Real Economy -- 3.1.9 Economic Importance -- 3.2 Financial Sector Regulation -- 3.2.1 Introduction -- 3.2.2 Overarching Political Considerations -- 3.2.3 The Legal Form of Financial Sector Regulation -- 3.2.4 Supervisory Actions -- 3.2.5 Recovery and Resolution -- 3.2.6 Compensation and Protection Schemes -- 3.2.7 Conduct Regulation -- 3.3 Regulatory Capital and Economic Capital -- 3.3.1 Introduction -- 3.3.2 Risk-Sensitive Capital Requirements -- 3.3.3 Regulatory Capital Requirements -- 3.3.4 The Structure of Regulatory Frameworks -- 3.3.5 Regulatory Arbitrage -- 3.4 Accounting -- 3.4.1 Introduction -- 3.4.2 Fair valuation and other valuation approaches -- 3.4.3 Impact of accounting standards on capital requirements -- 3.4.4 IFRS 9 -- 3.4.5 Going Concern Versus Gone Concern -- 3.4.6 TLAC and MREL.

3.5 Tranching -- 3.5.1 Introduction -- 3.5.2 Traditional CDOs -- 3.5.3 Initial Rationale Behind Issuance of CDOs -- 3.5.4 Synthetic CDOs -- 3.5.5 Risk Analysis of CDOs -- 3.5.6 Tranching and Leverage -- 3.5.7 Market Risk Appetite and Liquidity Risk -- 3.6 Rational and Irrational Behaviours -- 3.7 Key Takeaways -- References -- 4 Individual Elements of the Financial System -- 4.1 Banks -- 4.1.1 Introduction -- 4.1.2 Banking and Leverage -- 4.1.3 Regulatory Capital Frameworks -- 4.2 Insurers -- 4.2.1 Introduction -- 4.2.2 Can Insurers Generate or Amplify Systemic Risk? -- 4.2.3 Pandemics and Other Natural Disasters -- 4.2.4 Underappreciated Risks -- 4.2.5 Underappreciated Concentrations of Risk -- 4.2.6 Historical Anecdotes -- 4.2.7 What Causes Insurers to Fail? -- 4.2.8 Non-Traditional and Non-Insurance (NTNI) Activities -- 4.2.9 Identifying Systemically Important Insurers -- 4.2.10 Interest Rate Vulnerabilities -- 4.2.11 Regulatory Factors Influencing Observed Interest Rate Vulnerabilities -- 4.2.12 Resolution of Insurance Companies -- 4.3 Pension Funds -- 4.3.1 Introduction -- 4.3.2 Overall Structure of Pension Systems -- 4.3.3 The Social Nature of Pensions -- 4.3.4 The Economic Nature of Pension Liabilities -- 4.3.5 Benefit Security (And Adjustment) Mechanisms -- 4.3.6 Regulation and Supervision of Pension Arrangements -- 4.3.7 Systemic Vulnerabilities -- 4.4 Investment Funds -- 4.4.1 Introduction -- 4.4.2 Liquidity Transformation -- 4.4.3 Money Market Funds -- 4.4.4 Hedge Funds -- 4.4.5 Bond Funds (And Funds in Other Traditional Asset Classes) -- 4.4.6 CDOs, CLOs and Other Tranched Structures -- 4.4.7 Searching for Yield -- 4.4.8 Alternative Asset Classes -- 4.4.9 Clarifying Responsibilities -- 4.5 Asset Managers -- 4.5.1 Introduction -- 4.5.2 Asset Management Business Models -- 4.5.3 Can Asset Managers Contribute to Systemic Risk?.

4.5.4 Specialist Asset Managers Who Manage Non-Performing Loans Etc. -- 4.6 Shadow Banks -- 4.6.1 Introduction -- 4.6.2 Monitoring Shadow Banks -- 4.7 Securities Financing -- 4.7.1 Introduction -- 4.7.2 Securities Lending -- 4.7.3 Repo Agreements -- 4.7.4 Rehypothecation -- 4.8 Central Counterparties and Other Market Infrastructure Elements -- 4.8.1 Introduction -- 4.8.2 Central Clearing -- 4.8.3 Systemic Risks Expressed by Clearing Houses and CCPs -- 4.9 Governments /Sovereigns -- 4.9.1 Introduction -- 4.9.2 Systemic Risk Implications -- 4.9.3 Potential Remedies -- 4.10 Sovereign Wealth Funds and Other Long-Term Unconstrained Investors -- 4.11 Credit Rating Agencies Etc. -- 4.12 The Physical Ecosphere -- 4.13 Non-Financial Firms and the Rest of the Real Economy -- 4.14 Key Takeaways -- References -- 5 Measuring Systemic Risk -- 5.1 Conceptual Components -- 5.1.1 Risk Measures -- 5.1.2 Stress Testing -- 5.1.3 Macroprudential Overlays -- 5.1.4 Estimating Risk Measures -- 5.2 Risk Analytics Proposed by Academics -- 5.2.1 Introduction -- 5.2.2 Systemic Expected Shortfall -- 5.2.3 CoVaR -- 5.2.4 10 by 10 by 10 -- 5.2.5 Supervisory Capital Assessment Program (SCAP) -- 5.3 The Cloning Property -- 5.4 Risk Analytics Used by Policymakers -- 5.4.1 Introduction -- 5.4.2 Structure of Typical Financial Stability Reports -- 5.4.3 Visualisation of Systemic Risk Exposures -- 5.5 Data and IT System Requirements -- 5.5.1 Introduction -- 5.5.2 Will the Extra Data Prove Useful? -- 5.5.3 Information Technology (IT) Challenges -- 5.5.4 'Unstructured' IT Approaches -- 5.6 Key Takeaways -- References -- 6 Designing and Implementing Macroprudential Policy -- 6.1 The History of Macroprudential Policy Making -- 6.2 Longer-Term Implications of Increased Focus on Macroprudential Policy -- 6.3 Differentiating between Macroprudential, Microprudential and Monetary Policy.

6.4 Banking Sector Macroprudential Policies -- 6.4.1 Introduction -- 6.4.2 Tools Used to Date -- 6.4.3 Identifying a Macroprudential Policy Stance -- 6.4.4 Challenges -- 6.5 Identifying Systemically Important Firms -- 6.5.1 Introduction -- 6.5.2 Impact to a Sector of Having Some G-Sifis within It -- 6.6 Entity-Based versus Activity-Based Regulation -- 6.7 Central Clearing -- 6.7.1 Introduction -- 6.7.2 Lobbying against Such Changes -- 6.7.3 The Risk Consequences of Central Clearing -- 6.8 Key Takeaways -- References -- 7 Network Effects and Societal Shifts -- 7.1 Cyber Risk -- 7.2 Entrepreneurialism Versus Conservatism -- 7.3 Interconnectivity and Knowledge Sharing -- 7.4 Can Advances in IT 'Solve' Systemic Risk? -- 7.4.1 Introduction -- 7.4.2 The Intrinsic Difficulty of Risk Management -- 7.4.3 The Speed at Which Risk Management Needs are Becoming More Complex -- 7.4.4 Addressing privacy -- 7.4.5 Blockchain and Other Related Technologies -- 7.4.6 Open Source and 'Community' Based Software -- 7.5 Interpreting the Concept of 'Fairness' -- 7.6 Key Takeaways -- References -- 8 Responding to Systemic Risk -- 8.1 Broad Regulatory Trends -- 8.2 Managing the Interaction with Regulators and Supervisors -- 8.3 Data Management Activities -- 8.4 Risk Modelling -- 8.5 Risk Management and Governance -- 8.6 Systemic Risk Officers -- 8.7 Responding to Changes in Market Structure -- 8.8 Key Takeaways -- References -- Index.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2024. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.