T2: Systemic Risk and Network Connectivity

Project Start:01/2016
Status:Completed
Researchers:Monica Billio, Massimiliano Caporin, Giuliano Curatola, Aleksey Kolokolov, Christoph Meinerding, Roberto Panzica, Loriana Pelizzon, Christian Schlag, Zorka Simon, Sviataslau Sivagrakau, Matthias Thiemann, Tatiana von Landesberger
Category: Financial Intermediation, Financial Markets, Systemic Risk Lab
Funded by:LOEWE

Systemic risk is a phenomenon that has moved to the center of attention during the financial crisis. Although it seems intuitively clear what systemic risk is, there is no unique definition in the literature, and there are many ways to measure it. In this team project we want to investigate the nature, measurement, and implications of systemic risk from a wide range of perspectives. In more detail we want to (i) study the special characteristics of the subset of systemic risk measures, which were ultimately adopted by regulators around the world,(ii) further develop tools to make systemic risk visible, (iii) analyze in detail which implications different notions of systemic risk have for equilibrium stock returns and volatilities, (iv) develop new empirical approaches to measure systemic risk based on market and balance sheet data together, and (v) analyze how similar to or different from exposure to common factors systemic risk actually is. The research in this project covers a wide range of disciplines, ranging from sociology, economics, econometrics, and finance to computer science, and the work packages include both theoretical and empirical parts. The results of the project should help to gain a better understanding of systemic risk along all the above dimensions. The output of the project is relevant to policy makers and regulators, since they need to be aware of the implications of the different possible policy choices, as well as to investors and other market participants, since they need to understand if and to what degree systemic risk network connectivity has an impact on risk premia, volatilities, and spillovers between markets.

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