Risk Measurement and Systemic Risk

01 October 2002

This volume contains papers that were either presented or are based on presentations at the Third Joint Central Bank Research Conference on Risk Measurement and Systemic Risk, which took place in Basel on 7 and 8 March 2002 at the Bank for International Settlements (BIS). The main goal of the conference was to bring together the business, research and policy communities to foster active exchange on issues related to risk measurement and systemic risk.

The papers in the volume focus on questions relating to the nature and sources of market liquidity, recent advances in risk measurement methods, sources of banking crises, and contagion effects across regions and markets.

This third in a series of joint research conferences was organised by the BIS on behalf of the Committee on the Global Financial System (CGFS), in co-operation with the European Central Bank, the Bank of Japan and the Board of Governors of the Federal Reserve System . The two earlier conferences were hosted by the Federal Reserve Board and the Bank of Japan in 1995 and 1998, respectively.

Risk Measurement and Systemic Risk, a summary (PDF: 9 pages, 198 kb)

Part 1: Introductory remarks and luncheon addresses
Introductory remarks (PDF: 4 pages, 89 kb) by Andrew D Crockett
Triangular view of systemic risk and central bank responsibility (PDF: 4 pages, 73 kb) by Yutaka Yamaguchi
Reflections on recent financial incidents (PDF: 3 pages, 69 kb) by Tommaso Padoa-Schioppa

Part 2: Papers
Session 1: Banking stability
Liquidity, asset prices and systemic risk (PDF: 11 pages, 286 kb) by Franklin Allen and Douglas Gale
Implications of the bank merger wave for competition and stability (PDF: 13 pages, 280 kb) by Elena Carletti, Philipp Hartmann and Giancarlo Spagnolo
Financial crises and incomplete information (PDF: 8 pages, 210 kb) by Mariassunta Giannetti

Session 2: Market contagion
Transmission of contagion in developed and developing international bond markets (PDF: 14 pages, 426 kb) by Mardi Dungey, Renée Fry, Brenda González-Hermosillo and Vance Martin
Financial turmoil: systemic or regional? (PDF: 2 pages, 52 kb) by Graciela Kaminsky and Carmen Reinhart
Social learning and financial crisis (PDF: 7 pages, 315 kb) by Marco Cipriani and Antonio Guarino

Session 3: Liquidity I
Positive feedback trading under stress: evidence from the US Treasury market (PDF: 39 pages, 325 kb) by Benjamin Cohen and Hyun Shin
Large investors and liquidity: a review of a the literature (PDF: 14 pages, 311 kb) by Matthew Pritsker
Hedging demand and foreign exchange risk premia (PDF: 19 pages, 763 kb) by David Tien

Session 4: Liquidity II
Measuring and explaining liquidity on an electronic limit order book: evidence from Reuters D2000-2 (PDF: 5 pages, 96 kb) by Jón Daníelsson and Richard Payne
The impact of the market liquidity in times of stress in the corporate bond issuances  (PDF: 14 pages, 375 kb) by Paul Harrison
Liquidity of the Hong Kong stock market since the Asian crisis (PDF: 32 pages, 807 kb) by Jim Wong and Laurence Fung

Session 5: Risk Measurement
Modelling and forecasting realised volatility (PDF: 1 page, 29 kb) by Torben Andersen, Tim Bollerslev, Francis Diebold and Paul Labys
Comparative analyses of expected shortfall and VaR under market stress (PDF: 55 pages, 506 kb) by Yasuhiro Yamai and Toshinao Yoshiba
Extreme tails for linear portfolio credit risk models (PDF: 13 pages, 624 kb) by André Lucas, Pieter Klaassen, Peter Spreij and Stefan Straetmans

Session 6: Market behaviour and monitoring
Interbank exposures and systemic risk (PDF: 19 pages, 362 kb) by Martin Blåvarg and Patrick Nimander
Equity and bond market signals as leading indicators of bank fragility (PDF: 42 pages, 347 kb) by Reint Gropp, Jukka Vesala and Giuseppe Vulpes
The effect of VaR based risk management on asset prices and the volatility smile (PDF: 24 pages, 825 kb) by Arjan Berkelaar, Phornchanok Cumperayot and Roy Kouwenberg

Annex 1: Conference programme (PDF: 2 pages)
Annex 2: List of conference participants (PDF: 3 pages)

The full publication in one file:
The full conference volume (Large PDF: 383 pages, 4672 kb)