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Systemic Risk in Financial Risk Regulation


  • Tomas Cipra

    () (Faculty of Mathematics and Physics, Charles University in Prague)

  • Radek Hendrych

    () (Faculty of Mathematics and Physics, Charles University in Prague)


The paper deals with the systemic risk concept which is important in the framework of modern risk regulatory systems in finance and insurance (the most actual examples are Basel III in finance and Solvency II in insurance). Two numerical applications of possible approaches are presented. The first one shows that marginal expected shortfall MES can be a useful risk measure when the systemic risk is examined using the Czech data represented by the composing index PX of Prague Stock Exchange. The second approach based on the common shock can be suitable for risk regulation in insurance.

Suggested Citation

  • Tomas Cipra & Radek Hendrych, 2017. "Systemic Risk in Financial Risk Regulation," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(1), pages 15-38, March.
  • Handle: RePEc:fau:fauart:v:67:y:2017:i:1:p:15-38

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    References listed on IDEAS

    1. Jon Frye, 2000. "Collateral damage detected," Emerging Issues, Federal Reserve Bank of Chicago, issue Sep.
    2. Pesaran, M. Hashem & Schuermann, Til & Treutler, Bjorn-Jakob & Weiner, Scott M., 2006. "Macroeconomic Dynamics and Credit Risk: A Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1211-1261, August.
    3. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    4. Jiménez, Gabriel & Mencía, Javier, 2009. "Modelling the distribution of credit losses with observable and latent factors," Journal of Empirical Finance, Elsevier, vol. 16(2), pages 235-253, March.
    5. Per Asberg Sommar & Hovick Shahnazarian, 2009. "Interdependencies between Expected Default Frequency and the Macro Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 5(3), pages 83-110, September.
    6. Jiri Witzany, 2011. "A Two Factor Model for PD and LGD Correlation," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 18(28).
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    More about this item


    systemic risk; common shock; marginal expected shortfall; Basel III; Solvency II;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General


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