Systemic Risk Driven Portfolio Selection

July 10, 2019 10:08 am Published by

The balance between risk and return has been at the center of portfolio construction methodologies. Although the asset allocation literature has primarily focused on a firm's individual risk, the Global 2007-2009 financial crisis highlighted the importance of accounting for systemic events, i.e., extreme forms of risk that can have severe consequences on the financial system.

image of building blocks a metaphor for systemic risk

Systemic Risk Measures & Portfolio Choice

August 27, 2018 10:36 am Published by

Since the last financial crisis, numerous attempts have been made to identify and measure the systemic risk of financial institutions. In this paper, we develop a framework for the optimal portfolio choice based on an exogenous systemic risk measure.