Both the risk management profession and the financial supervisory and regulatory framework are undergoing deep structural changes brought on by the global financial crisis of 2008. Nowadays, market analysts, regulators and supervisors face the challenge of evaluating the risk profile of financial institutions in a systemic context. Systemic Risk Assessment and Oversight presents these tools and methods within the context of a bottom-up portfolio approach to systemic risk. While several of the methods and tools explored in the first half of the book can be used independently, the portfolio approach offers a unified framework to understand how risk flows from individual institutions to the system. Within this framework, it becomes easier to understand the scope of the tools and methods, as well as their limitations. This second edition presents the material in five different sections: An overview of systemic risk that emphasises an operational definition useful for guiding the development of quantitative tools. Develops and explains tools useful for evaluating the stand-alone default risk of financial institutions, as well as of non-financial corporations and, in certain in-stances, sovereigns. The third section builds upon the above to construct systemic risk measures and methods to assess how default risk can spill over across institutions. Discusses advances in the analysis of financial networks. Regulation and macroprudential policy.
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