A systematic approach to identify systemically important firms


Natasha Agarwal, Sanchit Arora, Akhil Behl, Rohini Grover, Shashwat Khanna, Susan Thomas


We combine three measures of systemic importance of a firm – Granger Causality, Marginal Expected Shortfall, and Conditional Value at Risk – to calculate a single systemic risk index (SRI). The SRI is used to identify systemically important firms (SIFs) among the 50 largest firms in a large emerging market, India. This work unifies the treatment of non-financial firms with the analysis of financial firms, with non-financial firms appearing prominently in the ranking of the highest values of SRI. The methods and results of this paper are useful for identifying SIFs, and raise new questions about how to approach systemic risk regulation.

Citation: A systematic approach to identify systemically important firms, Natasha Agarwal, Sanchit Arora, Akhil Behl, Rohini Grover, Shashwat Khanna, Susan Thomas IGIDR Working paper WP-2013-021, October 2013.

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