Systemic Risk Exposures: A 10-by-10-by-10 Approach
This chapter presents and discusses a "10-by-10-by-10" network-based approach to monitoring systemic financial risk. Under this approach, a regulator would analyze the exposures of a core group of systemically important financial firms to a list of stressful scenarios, say 10 in number. For each scenario, about 10 such designated firms would report their gains or losses. Each reporting firm would also provide the identities of the 10 counterparties with whom the gain or loss for that scenario is the greatest in magnitude relative to all counterparties. The gains or losses with each of those 10 counterparties would also be reported, scenario by scenario, measured in terms of market value and also in terms of cash flow, allowing regulators to assess risk magnitudes in terms of stresses to both economic values and also liquidity. Exposures would be measured before and after collateralization. One of the scenarios would be the failure of a counterparty. The "top ten" counterparties for this scenario would therefore be those whose defaults cause the greatest losses to the reporting firm. The number "10" is, thoughout, arbitrary.
Current Editorial Board Service
Econometrica, 1990 to present.
Review of Finance, 1995 to present.
Journal of Computational Finance, 1997 to present.
Advances in Mathematical Economics, 1998 to present.
Journal of Financial Economics, 2001 to present.
Mathematics and Financial Economics, 2007 to present.
AEJ: Microeconomics, 2007 to present.
International Journal of Central Banking, 2009 to present.
Stochastic Systems, 2009 to present.
Review of Asset Pricing Studies, 2010 to present.
Other Current Professional Positions
American Academy of Arts and Sciences, Fellow.
Econometric Society, Fellow and Member of Council.
National Bureau of Economic Research, Research Associate.
NCCR FinRisk, International Scientific Council, Switzerland.
American Finance Association, Board of Directors.
Chicago Mercantile Exchange-Mathematical Sciences Research Institute, Prize Committee.
Federal Reserve Bank of New York, Financial Advisory Roundtable.
Financial Economists Roundtable.
Pacific Institute of Mathematical Sciences, Board of Directors.
Working Group on Global Markets, Stanford University.
Squam Lake Group, Member.
Stanford Institute of Economic Policy Research (SIEPR), Senior Fellow.
Society of Financial Econometrics (SoFiE), Council.
Hausdorff Research Institute for Mathematics, University of Bonn, Stochastic Dynamics in Economics and Finance, Advisory Board.
Swiss Finance Institute, Scientific Council.
Current Business Activities
Lehman Estate (New York), Consulting and Expert Witness.
Matterhorn Investment Management (hedge fund), Consultation.
Kepos Capital (hedge fund), Academic Advisory Board.
Cantor Fitzgerald (interdealer brokerage), Expert Witness.
Moody's Corporation, Board of Directors.