ADB's Distinguished Speakers Program Measuring the Connectedness of the Financial System: Implications for Risk Management
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adev_a_00026.pdf
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2.13 MB
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Adobe PDF
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fb87d4a3534629118dea6ea9b8653861
Author(s)
Merton, Robert
Date Issued
March 2014
Journal
Asian Development Review
Publisher
MIT Press
Citation
Merton, Robert C. “ADB’s Distinguished Speakers Program Measuring the Connectedness of the Financial System: Implications for Risk Management.” Asian Development Review 31, 1 (March 2014): 186–210 © 2014 Asian Development Bank and Asian Development Bank Institute
Version
Final published version
Abstract
Well thank you very much. I greatly appreciate the opportunity to speak to you today and for your taking the time to do so.
As an introduction, the topic for today is looking at connectedness in the financial system, and I'll talk about a specific way that connectedness is defined in this context, and we'll talk about developing a new and better way to measure the degree of connectedness in the institution in a useful way, with respect to credit risk in particular, and how we might look at all that information and convey it in a fashion that we might be able to monitor, or at least get better information or insights, into potential systemic events.
Macro financial risk propagation is a big issue for governments and financial stability, but it also is important in the private sector, particularly for very large asset managers. Managers that have very large asset pools, are too large to actually get out of harm's way, and so like the rest of us, they have to be prepared to deal with large market shocks—instead of simply trying to get away from them.
MIT Department
Sloan School of Management
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DOI of Published Version
https://doi.org/10.1162/ADEV_A_00026
