Systemic Risk
About the Lecture
The lecture Systemic Risk by Edu Pristine is from the course ARCHIV Operational Risk & Risk Management Practices. It contains the following chapters:
- Systemic Risk
- Zero-Sum Game in Financial Instruments
- Government's Role in Crisis
- Disaster Myopia is a variation of regency effect
Author of lecture Systemic Risk
Edu Pristine
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Excerpts from the accompanying material
... - The financial system developed is a zero-sum game as the cumulative benefit out of the system is zero, when all the players are taken into consideration. -Let’s take a simple example of a forward contract where the total ...
... companies-in banks and other depository financial institutions. -The movement of capital from surplus units through financial institutions to deficit units seeking bank credit is an indirect form of financing known as intermediation-consumers are net suppliers of funds, whereas business and government are net borrowers. -A bank gives its depositors a claim against itself, meaning that the depositor has recourse against the bank (and, if the bank ...
... services, credit card issuers, mortgage companies, brokerage firms etc are the major component parts of the financial services industry. -Balance between these component parts is ...
... and would be driven into insolvency led the confidence to evaporate out of financial system. -This loss in confidence and trust of the investors in the financial system, led the whole financial system to collapse. -In this kind of environment there won’t be any transfer of the ...
... -Until September ‘08, the Fed and treasury provided liquidity to the system and managed the insolvency of major firms like AIG, Bear Stearns. -Later in September ‘08, $700 billion was agreed to be injected in ...
... can make the trading process much more difficult as well as much more costly. -RBI generally infuse cash into the market by reducing the cash reserve ratio to some points making market liquid ...
... for the bank failures in summer 2007 ...
... -Risk managers ignored market failures and financial depressions before 1998 in their risk models. -Risks projected were much lower than actual values because of inappropriate data sets ...
... -Financial system is like a network with firms at each node and financial interconnections between them as link Any investment is dependent on the performance of several other counter parties in the financial chain. -Risk calculation from ...
... -Require assessment of counterparties. -Require Self-Regulatory Organization oversight by reference to industry standards. -Require pre-clearance of systems and ...
