Systemic risk

In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to the risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the entire system.[1][2][3] It can be defined as "financial system instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries".[4] It refers to the risks imposed by interlinkages and interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure, which could potentially bankrupt or bring down the entire system or market.[5] It is also sometimes erroneously referred to as "systematic risk".

  1. ^ Banking and currency crises and systemic risk, George G. Kaufman (World Bank), Internet Archive
  2. ^ Dwyyer, Gerald P. (2009-11-06). "What is systemic risk, anyway?". atlantafed.org. Retrieved 2024-02-14.
  3. ^ Cite error: The named reference Ilin was invoked but never defined (see the help page).
  4. ^ Systemic Risk: Relevance, Risk Management Challenges and Open Questions Archived 2009-03-05 at the Wayback Machine, Tom Daula
  5. ^ Schwarcz, Steven L. (2008). Systemic Risk. SSRN 1008326.