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Understanding Systemic Risk in Global Financial Markets


Understanding Systemic Risk in Global Financial Markets


Wiley Finance 1. Aufl.

von: Aron Gottesman, Michael Leibrock

57,99 €

Verlag: Wiley
Format: PDF
Veröffentl.: 07.06.2017
ISBN/EAN: 9781119348542
Sprache: englisch
Anzahl Seiten: 272

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Beschreibungen

<b>An accessible and detailed overview of the risks posed by financial institutions</b> <p><i>Understanding Systemic Risk in Global Financial Markets</i> offers an accessible yet detailed overview of the risks to financial stability posed by financial institutions designated as systemically important. The types of firms covered are primarily systemically important banks, non-banks, and financial market utilities such as central counterparties. Written by Aron Gottesman and Michael Leibrock, experts on the topic of systemic risk, this vital resource puts the spotlight on coherency, practitioner relevance, conceptual explanations, and practical exposition. <p>Step by step, the authors explore the specific regulations enacted before and after the credit crisis of 2007-2009 to promote financial stability. The text also examines the criteria used by financial regulators to designate firms as systemically important. The quantitative and qualitative methods to measure the ongoing risks posed by systemically important financial institutions are surveyed. <ul> <li>A review of the regulations that identify systemically important financial institutions</li> <li>The tools to use to detect early warning indications of default</li> <li>A review of historical systemic events their common causes</li> <li>Techniques to measure interconnectedness</li> <li>Approaches for ranking the order the institutions which pose the greatest degree of default risk to the industry</li> </ul> <p><i>Understanding Systemic Risk in Global Financial Markets</i> offers a must-have guide to the fundamentals of systemic risk and the key critical policies that work to reduce systemic risk and promoting financial stability.
<p>Preface xiii</p> <p>Acknowledgments xvii</p> <p>About the Authors xviii</p> <p><b>Chapter 1 Introduction to Systemic Risk 1</b></p> <p>What Is Systemic Risk? 2</p> <p>Systemic Risk Drivers 3</p> <p>Why Systemic Risk Must Be Understood, Monitored, and Managed 5</p> <p><b>Chapter 2 How We Got Here: A History of Financial Crises 9</b></p> <p>Common Drivers of Historical Crises 10</p> <p>Bursting of Asset Bubbles 10</p> <p>Banking Crises 14</p> <p>Sovereign Debt Crisis 15</p> <p>International Contagion 18</p> <p><b>Chapter 3 The Credit Crisis of 2007–2009 24</b></p> <p>Planting the Seeds of a Bubble: The Early 2000s 25</p> <p>Wall Street’s Role 27</p> <p>The U.S. Government Takeover of the GSEs 30</p> <p>The Tipping Point: Lehman Brothers’ Failure 32</p> <p>Aftermath of the Credit Crisis 35</p> <p>Cost of Government Bailouts 37</p> <p><b>Chapter 4 Systemic Risk, Economic and Behavioral Theories: What Can We Learn? 44</b></p> <p>Minsky Three-Part Model 45</p> <p>Debt Deflation Cycle 46</p> <p>Benign Neglect 47</p> <p>Behavioral Theories 48</p> <p>Risk Aversion Bias 49</p> <p>Asset Prices 50</p> <p>Homogeneous Expectations versus Heterogeneity 51</p> <p>Anchoring Heuristic 52</p> <p>Excessive Optimism 52</p> <p>Familiarity Bias 53</p> <p>Fallacy of Composition 53</p> <p>Fight or Flight 53</p> <p><b>Chapter 5 Systemic Risk Data 59</b></p> <p>Key Data Attributes 60</p> <p>Key Policy Changes to Address Data Gaps 60</p> <p>Data Sources 63</p> <p>Data Collection Challenges and Remaining Gaps 63</p> <p>Move Toward Standardization: Legal Entity Identifier Initiative 68</p> <p><b>Chapter 6 Macroprudential versus Microprudential Oversight 73</b></p> <p>A Comparison of Macroprudential versus Microprudential 74</p> <p>Microprudential Policies 74</p> <p>Macroprudential Policies 76</p> <p>A Historical Perspective on Macroprudential Tools 77</p> <p>Choice of Macroprudential Policy Tools 79</p> <p><b>Chapter 7 Introduction to the U.S. Regulatory Regime 84</b></p> <p>Who Are the Regulators? 84</p> <p>U.S. Regulatory Approaches 86</p> <p>Comparison of U.S. versus International Financial Regulatory Regimes 87</p> <p>Introduction to the Dodd-Frank Act 90</p> <p><b>Chapter 8 Introduction to International Regulatory Regimes 97</b></p> <p>The Financial Stability Board 97</p> <p>The Basel Accords 99</p> <p>The European Systemic Risk Board 99</p> <p>Principles for Financial Market Infrastructures 102</p> <p><b>Chapter 9 Systemically Important Entities 107</b></p> <p>Introduction to Systemically Important Entities 107</p> <p>Classification of Entities as Systemically Important by the FSOC 108</p> <p>Bank SIFIs 110</p> <p>Nonbank SIFIs 110</p> <p>SIFMUs 112</p> <p>Globally Systemically Important Banks 112</p> <p>Total Loss-Absorbing Capacity (TLAC) Requirements 114</p> <p>Broad Impact of Financial Stability Requirements 117</p> <p><b>Chapter 10 The Volcker Rule 120</b></p> <p>Introduction to the Volcker Rule 120</p> <p>The Volcker Rule: Details 122</p> <p>Prohibition of Proprietary Trading 123</p> <p>Prohibition of Ownership or Sponsorship of Hedge Funds and Private Equity Funds 123</p> <p>The Volcker Rule and Systemically Risky Nonbank Financial Companies 123</p> <p>Activities That Are Permitted Despite the Volcker Rule 124</p> <p>Implementation of the Volcker Rule 125</p> <p>Volcker Rule: Criticism 126</p> <p><b>Chapter 11 Counterparty Credit Risk 130</b></p> <p>Overview of Derivative Securities 130</p> <p>Counterparty Exposure 133</p> <p>How Counterparty Credit Risk Is Managed 136</p> <p>Collateral 136</p> <p>Netting 136</p> <p>Central Counterparties 139</p> <p>Counterparty Credit Risk and Systemic Risk 142</p> <p><b>Chapter 12 The Dodd-Frank Act and Counterparty Credit Risk 147</b></p> <p>Measuring Counterparty Exposure in the OTC Derivatives Market 147</p> <p>Overview of Historical Data 149</p> <p>The Evolution of the U.S. Regulatory Approach toward OTC Derivatives 152</p> <p>Key Provisions of Title VII of the Dodd-Frank Act 153</p> <p>Mandatory Clearing 154</p> <p>Execution Platforms and Data Repositories 154</p> <p>Registration Requirements 155</p> <p>The Push-Out Rule 155</p> <p>The End User Exemption 155</p> <p>Criticism of Title VII of the Dodd-Frank Act 155</p> <p><b>Chapter 13 The Basel Accords 159</b></p> <p>What Are the Basel Accords? 159</p> <p>The Approach of the Basel Accords 160</p> <p>Basel I 161</p> <p>Basel II 163</p> <p>Pillar 1: Minimum Capital Requirements 163</p> <p>Pillar 2: Supervisory Review 164</p> <p>Pillar 3: Market Discipline 165</p> <p>Basel II. 5 165</p> <p>Basel III 165</p> <p>The Continuing Evolution of the Basel Accords 166</p> <p><b>Chapter 14 Lender of Last Resort 169</b></p> <p>Lender of Last Resort Concept 169</p> <p>Henry Thornton, Walter Bagehot, and Alternative Views 170</p> <p>The Fed’s Role in the Great Depression 172</p> <p>The Credit Crisis of 2007–2009 173</p> <p><b>Chapter 15 Interconnectedness Risk 177</b></p> <p>A Case Study of Interconnectedness 178</p> <p>Interconnectedness Categories 179</p> <p>The Depository Trust & Clearing Corporation 180</p> <p>Post-Crisis Regulatory View of Interconnectedness 181</p> <p>Basel Committee on Banking Supervision 181</p> <p>Office of Financial Research 182</p> <p>CPMI IOSCO Principles 184</p> <p>An Approach to Analyzing Interconnectedness Risk 185</p> <p>The Depository Trust & Clearing Corporation 185</p> <p><b>Chapter 16 Conclusion: Looking Ahead 190</b></p> <p>It’s Not a Question of If, but When, Where, and How 192</p> <p>A Summary of Global Surveys 192</p> <p>Sources of Systemic Risk 193</p> <p>Preparing for the Next Crisis 194</p> <p>Appendix: Systemic Risk Models 198</p> <p>Structural versus Reduced-Form Credit Models 198</p> <p>Contingent Claims and Default Models 199</p> <p>Merton versus Garch 204</p> <p>Studies in Support of Merton 205</p> <p>Macroeconomic Measures 210</p> <p>Probability Distribution Measures 211</p> <p>Illiquidity Measures 214</p> <p>Counterparty Risk Measures 215</p> <p>Behavioral Models 217</p> <p>Solutions to the Knowledge Check Questions 223</p> <p>Index 239</p>
<p><B>ARON GOTTESMAN</B> is Professor of Finance and the chair of the Department of Finance and Economics at the Lubin School of Business at Pace University. He is widely published in academic journals and is the author of <i>Derivatives Essentials: An Introduction to Forwards, Futures, Options, and Swaps</i>. <p><B>MICHAEL LEIBROCK</B> is managing director, chief systemic risk officer, and head of Counterparty Credit Risk for The Depository Trust & Clearing Corporation (DTCC). He serves as chair of DTCC’s Model Risk Governance Committee and co-chair of the Systemic Risk Council, and is an active speaker globally on the topics of systemic and credit risk.
<p>Systemic risk is the risk that developments in the financial system will disrupt financial stability and the economy. While systemic risk has been a central concern since the Credit Crisis of 2007–2009, the history of finance shows that financial crises occur frequently and threats to financial stability are constant, requiring careful monitoring and management of systemic risk. <i>Understanding Systemic Risk in Global Financial Markets</i> is your in-depth primer on the core principles and dynamics of systemic risk that comes complete with a real-world approach to managing it. <p>In a brilliant presentation specifically designed for accelerated learning, two thought leaders from academia and business take you on an enlightening exploration of the prime drivers of systemic events—through such historic happenings as the Dutch Tulip Crisis, South Street Sea Bubble, the Great Depression, and the Credit Crisis of 2007–2009 — to offer an advantageous perspective on how these drivers influence banks and other financial institutions designated as systemically important. Without presuming any advanced background in mathematics, straightforward explanations illuminate theories in both economics and human behavior that contribute to financial crises in an attempt to understand the impact of potential events in the future. Through the unique lens this guidebook offers, you can clearly see the interconnectedness financial firms have with each other and the rest of the world, while gaining: <ul><li> A practical understanding of how to monitor and analyze real-world conditions to mitigate impact from a systemic crisis</li><li> A firm grasp of U.S. financial regulation, including the Dodd-Frank Act, as well as key international regulators and standards such as the Financial Stability Board and the Basel Accords</li><li> Cutting-edge insight into the latest ways data is now used to effectively monitor systemic financial risks </li></ul> <p><i>Understanding Systemic Risk in Global Financial Markets</i> gives you the perspective and hands-on skillset to effectively monitor and respond to events that can threaten financial stability.

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