IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Measuring Systemic Risk-Adjusted Liquidity (SRL); A Model Approach

  • Andreas Jobst

Little progress has been made so far in addressing—in a comprehensive way—the externalities caused by impact of the interconnectedness within institutions and markets on funding and market liquidity risk within financial systems. The Systemic Risk-adjusted Liquidity (SRL) model combines option pricing with market information and balance sheet data to generate a probabilistic measure of the frequency and severity of multiple entities experiencing a joint liquidity event. It links a firm’s maturity mismatch between assets and liabilities impacting the stability of its funding with those characteristics of other firms, subject to individual changes in risk profiles and common changes in market conditions. This approach can then be used (i) to quantify an individual institution’s time-varying contribution to system-wide liquidity shortfalls and (ii) to price liquidity risk within a macroprudential framework that, if used to motivate a capital charge or insurance premia, provides incentives for liquidity managers to internalize the systemic risk of their decisions. The model can also accommodate a stress testing approach for institution-specific and/or general funding shocks that generate estimates of systemic liquidity risk (and associated charges) under adverse scenarios.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=26203
Download Restriction: no

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/209.

as
in new window

Length: 69
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/209
Contact details of provider: Postal:
International Monetary Fund, Washington, DC USA

Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
Email:


More information through EDIRC

Order Information: Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Franklin Allen & Ana Babus & Elena Carletti, 2010. "Financial Connections and Systemic Risk," Economics Working Papers ECO2010/30, European University Institute.
  2. Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 1997. " Empirical Performance of Alternative Option Pricing Models," Journal of Finance, American Finance Association, vol. 52(5), pages 2003-49, December.
  3. Emmanuel Farhi & Mikhail Golosov & Aleh Tsyvinski, 2007. "A Theory of Liquidity and Regulation of Financial Intermediation," NBER Working Papers 12959, National Bureau of Economic Research, Inc.
  4. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  5. International Monetary Fund, 2011. "Paraguay; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/238, International Monetary Fund.
  6. Andrei Shleifer & Robert W. Vishny, 2010. "Fire Sales in Finance and Macroeconomics," NBER Working Papers 16642, National Bureau of Economic Research, Inc.
  7. International Monetary Fund, 2011. "Germany; Financial Sector Stability Assessment," IMF Staff Country Reports 11/169, International Monetary Fund.
  8. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Financial System Stability Assessment," IMF Staff Country Reports 10/247, International Monetary Fund.
  9. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
  10. Gary Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," Yale School of Management Working Papers amz2358, Yale School of Management, revised 01 Sep 2009.
  11. International Monetary Fund, 2011. "United Kingdom; Stress Testing the Banking Sector Technical Note," IMF Staff Country Reports 11/227, International Monetary Fund.
  12. Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
  13. Coval, Joshua & Stafford, Erik, 2007. "Asset fire sales (and purchases) in equity markets," Journal of Financial Economics, Elsevier, vol. 86(2), pages 479-512, November.
  14. Cao, Jin & Illing, Gerhard, 2008. "Endogenous Systemic Liquidity Risk," Discussion Papers in Economics 3358, University of Munich, Department of Economics.
  15. Acharya, Viral V & Pedersen, Lasse H & Philippon, Thomas & Richardson, Matthew P, 2012. "Measuring Systemic Risk," CEPR Discussion Papers 8824, C.E.P.R. Discussion Papers.
  16. Jan Ericsson, 2005. "Estimating Structural Bond Pricing Models," The Journal of Business, University of Chicago Press, vol. 78(2), pages 707-735, March.
  17. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
  18. Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  19. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-43.
  20. International Monetary Fund, 2011. "Chile: Staff report for the 2011 Article IV of Consultation," IMF Staff Country Reports 11/260, International Monetary Fund.
  21. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Technical Note on Stress Testing," IMF Staff Country Reports 10/244, International Monetary Fund.
  22. David Aikman & Piergiorgio Alessandri & Bruno Eklund & Prasanna Gai & Sujit Kapadia & Elizabeth Martin & Nada Mora & Gabriel Sterne & Matthew Willison, 2009. "Funding Liquidity Risk in a Quantitative Model of Systemic Stability," Working Papers Central Bank of Chile 555, Central Bank of Chile.
  23. Jobst, Andreas A., 2013. "Multivariate dependence of implied volatilities from equity options as measure of systemic risk," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 112-129.
  24. International Monetary Fund, 2011. "Sweden; Financial Sector Assessment Program Update: Technical Note on Contingent Claims Analysis Approach to Measure Risk and Stress Test the Swedish Banking Sector," IMF Staff Country Reports 11/286, International Monetary Fund.
  25. Ronn, Ehud I & Verma, Avinash K, 1986. " Pricing Risk-Adjusted Deposit Insurance: An Option-Based Model," Journal of Finance, American Finance Association, vol. 41(4), pages 871-95, September.
  26. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Reports on Observance and Codes," IMF Staff Country Reports 10/250, International Monetary Fund.
  27. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  28. International Monetary Fund, 2011. "Uruguay; 2011 Article IV Consultation," IMF Staff Country Reports 11/375, International Monetary Fund.
  29. International Monetary Fund, 2010. "Republic of Mozambique; Financial Sector Assessment program—Financial System Stability Assessment," IMF Staff Country Reports 10/12, International Monetary Fund.
  30. International Monetary Fund, 2011. "The Bahamas; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/338, International Monetary Fund.
  31. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
  32. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Technical Note on Crisis Management Arrangements," IMF Staff Country Reports 10/120, International Monetary Fund.
  33. Andreas Jobst, 2012. "Measuring Systemic Risk-Adjusted Liquidity (SRL); A Model Approach," IMF Working Papers 12/209, International Monetary Fund.
  34. Jones, E Philip & Mason, Scott P & Rosenfeld, Eric, 1984. " Contingent Claims Analysis of Corporate Capital Structures: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 39(3), pages 611-25, July.
  35. International Monetary Fund, 2010. "Republic of Serbia; Financial Sector Assessment Program Update: Financial System Stability Assessment," IMF Staff Country Reports 10/147, International Monetary Fund.
  36. International Monetary Fund, 2011. "Dominica; Staff Report for the 2011 Article IV consultation," IMF Staff Country Reports 11/324, International Monetary Fund.
  37. Craig B. Merrill & Taylor D. Nadauld & René M. Stulz & Shane Sherlund, 2012. "Did Capital Requirements and Fair Value Accounting Spark Fire Sales in Distressed Mortgage-Backed Securities?," NBER Working Papers 18270, National Bureau of Economic Research, Inc.
  38. Enrico Perotti & Javier Suarez, 2011. "A Pigovian Approach to Liquidity Regulation," International Journal of Central Banking, International Journal of Central Banking, vol. 7(4), pages 3-41, December.
  39. Mathias Drehmann & Nikola Tarashev, 2011. "Systemic importance: some simple indicators," BIS Quarterly Review, Bank for International Settlements, March.
  40. International Monetary Fund, 2011. "People's Republic of China; 2011 Article IV Consultation," IMF Staff Country Reports 11/192, International Monetary Fund.
  41. Heston, Steven L & Nandi, Saikat, 2000. "A Closed-Form GARCH Option Valuation Model," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 585-625.
  42. Christian Weistroffer, 2011. "Identifying Systemically Important Financial Institutions (SIFIs)," Working Papers id:4383, eSocialSciences.
  43. International Monetary Fund, 2011. "Canada; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/364, International Monetary Fund.
  44. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Technical Note on Regulatory Reform: OTC Derivatives," IMF Staff Country Reports 10/252, International Monetary Fund.
  45. IGNAT Ion & IFRIM Mihaela, 2011. "International Monetary Fund – Between Hope And Disillusion," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 55(2), pages 367-371.
  46. International Monetary Fund, 2010. "British Virgin Islands; Financial Sector Assessment Program Update: Financial System Stability Assessment," IMF Staff Country Reports 10/323, International Monetary Fund.
  47. Andreas Jobst, 2007. "Operational Risk; The Sting is Still in the Tail But the Poison Dependson the Dose," IMF Working Papers 07/239, International Monetary Fund.
  48. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October.
  49. Viral V. Acharya & João A. C. Santos & Tanju Yorulmazer, 2010. "Systemic risk and deposit insurance premiums," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 89-99.
  50. International Monetary Fund, 2011. "Belize; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/340, International Monetary Fund.
  51. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
  52. International Monetary Fund, 2011. "Australia; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/300, International Monetary Fund.
  53. International Monetary Fund, 2011. "Niger; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/357, International Monetary Fund.
  54. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Technical Note on Selected Issues on Oversight of Payment," IMF Staff Country Reports 10/123, International Monetary Fund.
  55. International Monetary Fund, 2011. "Chad; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/302, International Monetary Fund.
  56. International Monetary Fund, 2011. "Republic of Lithuania; 2011 Article IV Consultation," IMF Staff Country Reports 11/326, International Monetary Fund.
  57. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
  58. Bernard Dumas & Jeff Fleming & Robert E. Whaley, 1998. "Implied Volatility Functions: Empirical Tests," Journal of Finance, American Finance Association, vol. 53(6), pages 2059-2106, December.
  59. International Monetary Fund, 2012. "Spain; Financial System Stability Assessment," IMF Staff Country Reports 12/137, International Monetary Fund.
  60. International Monetary Fund, 2010. "United States; Publication of Financial Sector Assessment Program Documentation: Technical Note on Consolidated Regulation and Supervision," IMF Staff Country Reports 10/251, International Monetary Fund.
  61. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  62. Charles A. E. Goodhart, 2009. "Liquidity management," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 157-168.
  63. International Monetary Fund, 2011. "Mexico; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/250, International Monetary Fund.
  64. Laura Valderrama, 2010. "Macroprudential Regulation Under Repo Funding," IMF Working Papers 10/220, International Monetary Fund.
  65. Manconi, Alberto & Massa, Massimo & Yasuda, Ayako, 2012. "The role of institutional investors in propagating the crisis of 2007–2008," Journal of Financial Economics, Elsevier, vol. 104(3), pages 491-518.
  66. International Monetary Fund, 2011. "Nepal; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/318, International Monetary Fund.
  67. International Monetary Fund, 2011. "Bangladesh; Staff Report for the 2011 Article IV Consultation," IMF Staff Country Reports 11/314, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:12/209. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)

or (Hassan Zaidi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.