Systemic Risk Analysis and SIFIs Detection: A Proposal for a Complete Methodology

53 Pages Posted: 9 Jul 2019 Last revised: 2 Aug 2019

See all articles by Luca Riccetti

Luca Riccetti

Università degli Studi di Macerata

Date Written: July 5, 2019

Abstract

The paper starts reviewing the financial systemic risk mechanisms and how to measure this risk. Then, it proposes to develop an agent-based multi-layer network simulation suited to measure the systemic risk, in order to identify Systemically Important Financial Institutions (SIFIs), and to understand the best policies both to prevent the distress and to mitigate the contagion. The methodology will correctly model the direct network contagion channel (interconnectedness of balance sheet of financial institutions, including direct losses and liquidity hoarding), also integrating the indirect contagion channel (fire sales and bank runs), in order to reach the ground-breaking target of a full representation of the financial systemic risk.

Keywords: financial systemic risk, Systemically Important Financial Institutions (SIFIs), multi-layered network, fire sales, simulations

JEL Classification: G01, G17, G28

Suggested Citation

Riccetti, Luca, Systemic Risk Analysis and SIFIs Detection: A Proposal for a Complete Methodology (July 5, 2019). Available at SSRN: https://ssrn.com/abstract=3415730 or http://dx.doi.org/10.2139/ssrn.3415730

Luca Riccetti (Contact Author)

Università degli Studi di Macerata ( email )

via Crescimbeni
Macerata
Italy

HOME PAGE: http://docenti.unimc.it/luca.riccetti

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