NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Endogenous and Systemic Risk

Jon Danielsson, Hyun Song Shin, Jean-Pierre Zigrand

Chapter in NBER book Quantifying Systemic Risk (2013), Joseph G. Haubrich and Andrew W. Lo, editors (p. 73 - 94)
Conference held November 6, 2009
Published in January 2013 by University of Chicago Press
© 2013 by the National Bureau of Economic Research

This chapter, which examines the feedback between market volatility and traders' perception of risk, spells out the precise mechanism through which endogenous risk manifests itself, and discusses ways of mitigating it. It considers a variety of markets, explaining the implied volatility skew for options, the procyclical impact of Basel II bank capital requirements, and the optimal design for derivatives clearing and lenders of last resort.

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This paper was revised on August 29, 2014

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Document Object Identifier (DOI): 10.7208/chicago/9780226921969.003.0004

Commentary on this chapter:
  Comment, Bruce Mizrach
  Comment, Terence C. Burnham
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