The concentration of risk within financial system is considered to be a source of systemic instability. We propose a … theory to explain the structure of the financial system and show how it alters the risk taking incentives of financial … interconnected. This structure enables institutions to share the risk of systemic crisis in a privately optimal way, but channels …

exposure to those counterparties. A possible conjecture in this context is that individual risk diversification across more … particular, the diversification of credit risk across many borrowers has ambiguous effects on systemic risk in the presence of …

investigate how the structure of those networks can affect the capacity of regulators to assess the level of systemic risk. We … of systemic risk in terms of expected losses. We further quantify the effects of cyclicality, leverage, volatility and …

exposure to those counterparties. A possible conjecture in this context is that individual risk diversification across more … particular, the diversification of credit risk across many borrowers has ambiguous effects on systemic risk in the presence of …

The recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what … resilient for intermediate levels of risk diversification, and not when this is maximal, as generally thought so far. This …