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Endogenous Risk
Endogenous risk is a type of Financial risk that is created by the interaction of market participants. It was proposed by Jon Danielsson and Hyun-Song Shin in 2002. Risk can be classified into the two categories of exogenous and endogenous risk. Under exogenous risk, shocks to the financial system arrived from outside the system, like an asteroid might hit the earth. Market participants react to the shock but do not influence it. By contrast, with endogenous risk, the interaction of market participants, each with their own abilities, biases, prejudices and resources, results in most market outcomes and all large outcomes. In particular, systemic risk is a form of endogenous risk. As a practical interpretation of endogenous risk when applied to risk measurements, it can be further subdivided into actual risk, the underlying latent risk and perceived risk, what is reported by common risk measurement techniques, such as Value at risk Value at risk (VaR) is a measure of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Risk
Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent. A science has evolved around managing market and financial risk under the general title of modern portfolio theory initiated by Dr. Harry Markowitz in 1952 with his article, "Portfolio Selection". In modern portfolio theory, the variance (or standard deviation) of a portfolio is used as the definition of risk. Types According to Bender and Panz (2021), financial risks can be sorted into five different categories. In their study, they apply an algorithm-based framework and identify 193 single financial risk types, which are sorted into the five categories market risk, liquidity risk, credit risk, business risk and investment risk. Market risk The four standard market risk factors are equit ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Jon Danielsson
Jon Danielsson is an economist teaching at the London School of Economics and active in domestic and international policy debates. He received his PhD in the economics of financial markets from Duke University in 1991. Career Danielsson's research areas include systemic risk, artificial intelligence, cryptocurrency, cryptocurrencies, financial risk, hedge funds, financial regulations, market volatility, Market liquidity, liquidity, models of extreme market movements, and microstructure of foreign exchange markets. He has written extensively on the post-crash situation in Iceland. In 2012, he became director of the Systemic Risk Centre (SRC) at the London School of Economics, which was set up to study the risks that may trigger another financial crisis and to develop tools to help policymakers and financial institutions become better prepared. The Centre is funded by ESRC with an annual budget of £1 million. Illusion of control Danielsson published a book with Yale University ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Hyun-Song Shin
Hyun Song Shin () is a South Korean economic theorist and financial economist who focuses on global games. He has been the Economic Adviser and Head of Research of the Bank for International Settlements (BIS) since May 1, 2014. Previously, he was the Hughes-Rogers Professor of Economics at Princeton University since 2006, though he took a leave in December 2009 to advise South Korean President Lee Myung-bak on the international economy as well as help set the agenda for the G-20 Seoul summit in November 2010. Education and career Shin obtained a B.A. in philosophy, politics and economics at Oxford University (Magdalen College) in 1985, an MPhil in economics from Oxford's Nuffield College in 1987, and a DPhil in economics from Oxford's Nuffield College in 1988. Shin became a research fellow in 1988 and tutorial fellow in 1990 at Magdalen College, Oxford. In 1994 he moved to the University of Southampton, where he became a professor of economics. He moved back to Oxford in ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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.Banking and currency crises and systemic risk George G. Kaufman (World Bank), It can be defined as "financial ''system'' instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries". It refers to the risks imposed by ''interlink ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Value At Risk
Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by firms and regulators in the financial industry to gauge the amount of assets needed to cover possible losses. For a given portfolio, time horizon, and probability ''p'', the ''p'' VaR can be defined informally as the maximum possible loss during that time after excluding all worse outcomes whose combined probability is at most ''p''. This assumes mark-to-market pricing, and no trading in the portfolio. For example, if a portfolio of stocks has a one-day 95% VaR of $1 million, that means that there is a 0.05 probability that the portfolio will fall in value by more than $1 million over a one-day period if there is no trading. Informally, a loss of $1 million or more on this portfolio is expected on 1 day out of 20 days (because of 5% pr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Expected Shortfall
Expected shortfall (ES) is a risk measure—a concept used in the field of financial risk measurement to evaluate the market risk or credit risk of a portfolio. The "expected shortfall at q% level" is the expected return on the portfolio in the worst q\% of cases. ES is an alternative to value at risk that is more sensitive to the shape of the tail of the loss distribution. Expected shortfall is also called conditional value at risk (CVaR), average value at risk (AVaR), expected tail loss (ETL), and superquantile. ES estimates the risk of an investment in a conservative way, focusing on the less profitable outcomes. For high values of q it ignores the most profitable but unlikely possibilities, while for small values of q it focuses on the worst losses. On the other hand, unlike the discounted maximum loss, even for lower values of q the expected shortfall does not consider only the single most catastrophic outcome. A value of q often used in practice is 5%. Expected shortfall is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Supply Chain Network
A supply-chain network (SCN) is an evolution of the basic supply chain. Due to rapid technological advancement, organizations with a basic supply chain can develop this chain into a more complex structure involving a higher level of interdependence and connectivity between more organizations, this constitutes a supply-chain network. A supply-chain network can be used to highlight interactions between organizations as well as to show the flow of information and materials across organizations. Supply-chain networks are now more global than ever and are typically structured with five key areas: external suppliers, production centers, distribution centers (DCs), demand zones, and transportation assets. Overview All organizations can purchase the components to build a supply-chain network, it is the collection of physical locations, transportation vehicles and supporting systems through which the products and services firm markets are managed and ultimately delivered. Physical locatio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
