NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Risk Topography

Markus K. Brunnermeier, Gary Gorton, Arvind Krishnamurthy

Chapter in NBER book NBER Macroeconomics Annual 2011, Volume 26 (2012), Daron Acemoglu and Michael Woodford, editors (p. 149 - 176)
Conference held April 8-9, 2011
Published in August 2012 by University of Chicago Press
© 2012 by the National Bureau of Economic Research
in NBER Book Series NBER Macroeconomics Annual

The aim of this paper is to conceptualize and design a risk topography that outlines a data acquisition and dissemination process that informs

policymakers, researchers, and market participants about systemic risk. Our approach emphasizes that systemic risk (1) cannot be detected based on measuring cash instruments, for example, balance sheet items or ratios such as leverage and income statement items; (2) typically builds up in the background before materializing in a crisis; and (3) is determined by market participants’ endogenous response to various shocks. Our measurement system asks that regulators elicit from market participants their (partial equilibrium) risk as well as liquidity sensitivities (our response indicator) with respect to major risk factors and liquidity scenarios. General equilibrium responses and economy-wide system effects can be calibrated using this panel data set.

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Document Object Identifier (DOI): 10.1086/663991

Commentary on this chapter:
  Comment, Darrell Duffie
  Comment, Hyun Song Shin
  Discussion, ,
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