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Bank Trading Risk and Systemic Risk

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  • Philippe Jorion

Abstract

This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The overall picture from these preliminary results is that there is a fair amount of diversification across banks and within banks across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the post-1998 period has witnessed an increase in volatility of trading revenues.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11037.

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Date of creation: Jan 2005
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Publication status: published as Carey, Mark and Rene M. Stulz (eds.) The Risks of Financial Institutions A National Bureau of Economic Research Conference Report. Chicago and London: University of Chicago Press, 2006.
Handle: RePEc:nbr:nberwo:11037

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Cited by:
  1. Purnanandam, Amiyatosh, 2007. "Interest rate derivatives at commercial banks: An empirical investigation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(6), pages 1769-1808, September.
  2. John Kambhu & Til Schuermann & Kevin J. Stiroh, 2007. "Hedge funds, financial intermediation, and systemic risk," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Dec, pages 1-18.
  3. Pérignon, Christophe & Smith, Daniel R., 2010. "The level and quality of Value-at-Risk disclosure by commercial banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 34(2), pages 362-377, February.
  4. Pérignon, Christophe & Deng, Zi Yin & Wang, Zhi Jun, 2008. "Do banks overstate their Value-at-Risk?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(5), pages 783-794, May.

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