Campus Event Calendar

Event Entry

What and Who

Foster-Hart Risk and the Too-Big-to-Fail Banks: An Empirical Investigation

Abhinav Anand
Max-Planck-Institut für Informatik - D1
AG1 Mittagsseminar (own work)
AG 1, AG 2, AG 3, AG 4, AG 5, RG1, SWS, MMCI  
AG Audience

Date, Time and Location

Tuesday, 7 April 2015
30 Minutes
E1 4


The measurement of financial risk relies on two factors: determination of riskiness by use of an appropriate risk measure; and the distribution according to which returns are governed. Wrong estimates of either, severely compromise the accuracy of computed risk. We identify the too-big-to-fail banks with the set of “Global Systemically Important Banks” (G-SIBs) and analyze the equity risk of its equally weighted portfolio by means of the “Foster-Hart risk measure” — a new, reserve based measure of risk, extremely sensitive to tail

events. We model banks’ stock returns as an ARMA-GARCH process with multivariate “Normal Tempered Stable” innovations, to capture the skewed and leptokurtotic nature of stock returns. Our union of the Foster-Hart risk modeling with fat-tailed statistical modeling bears fruit, as we are able to measure the equity risk posed by the G-SIBs more accurately than is possible with current techniques.


Mayank Goswami
--email hidden
passcode not visible
logged in users only

Mayank Goswami, 02/25/2015 23:38
Mayank Goswami, 02/25/2015 23:38 -- Created document.