Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential risks caused by their systemic interactions. We investigate a simple dynamical model for understanding this tradeoff, consisting of a bank with a...

In November, 2011, the Financial Stability Board, in collaboration with the International Monetary Fund, published a list of 29 “systemically important financial institutions” (SIFIs, now referred to as “globally systemically important banks” or G-SIBs), institutions whose failure, by...

Currently financial stress test simulations that take into account multiple interacting contagion mechanisms are conditional on a specific, subjectively imposed stress-scenario. Eigenvalue-based approaches, in contrast, provide a scenario-independent measure of systemic stability, but only...