# Measuring Systemic Risk

“Measuring Systemic Risk” (2016), by Viral V. Acharya et al. Economics research paper. Original abstract below, unchanged. No free PDF was found.

- Authors: Viral V. Acharya, Lasse Heje Pedersen, Thomas Philippon, Matthew P. Richardson
- Published: October 11, 2016
- Field: Economics
- DOI: https://doi.org/10.1093/rfs/hhw088
- Source: https://doi.org/10.1093/rfs/hhw088

## Abstract

We present an economic model of systemic risk in which undercapitalization of the financial sector as a whole is assumed to harm the real economy, leading to a systemic risk externality.Each financial institution's contribution to systemic risk can be measured as its systemic expected shortfall (SES ), that is, its propensity to be undercapitalized when the system as a whole is undercapitalized.SES increases in the institution's leverage and its marginal expected shortfall (MES ), that is, its losses in the tail of the system's loss distribution.We demonstrate empirically the ability of components of SES to predict emerging systemic risk during the financial crisis of 2007-2009.We would like to thank Rob Engle for many useful discussions.

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