The financial crisis has taken us down paths we have never dreamed of. Much research and discussion is taking place (and will for years to come) on many aspects of what we have been experiencing over these past two years.
In a paper published in the September edition of the “International Journal of Central Banking” Piergiorgio Alessandria, Prasanna Gaib, Sujit Kapadiaa, Nada Moraa, and Claus Puhrc describe a prototype quantitative framework for gauging systemic risk which explicitly characterizes banks’ balance sheets and allows for macro credit risk, interest income risk, market risk, network interactions, and asset-side feedback effects. In presenting their results, the authors focus on projections for system wide banking assets in the United Kingdom, considering both unconditional distributions and stress scenarios. The paper “Towards a Framework for Quantifying Systemic Stability” is available at http://www.ijcb.org/journal/ijcb09q3a2.htm
