IMF paper develops model of systemic risk
A working paper published by the International Monetary Fund in June, studies the asymmetric response of the financial system to shocks in individual institutions.
Authors German Lopez-Espinosa, Antonio Moreno, Antonio Rubia and Laura Valderrama find the impact of a fall in individual market value on the overall system is sevenfold that of an increase for the median-sized firm. They develop an asymmetric value-at-risk model that accounts for this non-linearity.
Based on the model, the paper
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