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SRISK: a conditional capital shortfall measure of systemic risk

Christian Brownlees () and Robert Engle

No 37, ESRB Working Paper Series from European Systemic Risk Board

Abstract: We introduce SRISK to measure the systemic risk contribution of a financial firm. SRISK measures the capital shortfall of a firm conditional on a severe market decline, and is a function of its size, leverage and risk. We use the measure to study top US financial institutions in the recent financial crisis. SRISK delivers useful rankings of systemic institutions at various stages of the crisis and identifies Fannie Mae, Freddie Mac, Morgan Stanley, Bear Stearns and Lehman Brothers as top contributors as early as 2005-Q1. Moreover, aggregate SRISK provides early warning signals of distress in indicators of real activity. JEL Classification: C22, C23, C53, G01, G20Keywords: Systemic Risk Measurement, Great Financial Crisis, GARCH, DCC

New Economics Papers: this item is included in nep-ban, nep-bec, nep-cba, nep-ifn and nep-rmg
Date: 2017-03
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Journal Article: SRISK: A Conditional Capital Shortfall Measure of Systemic Risk (2017) Downloads
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Persistent link: http://EconPapers.repec.org/RePEc:srk:srkwps:201737

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