Capital Shortfall: A New Approach to Ranking and Regulating Systemic Risks

• DOI: 10.1257/aer.102.3.59
• Publication Date: 2012-05-21T19:53:29Z
• Authors: Viral Acharya; Robert Engle; Matthew Richardson
• Keywords: Capital (architecture)

The financial crisis of 2007-2009 has given way to the sovereign debt 2010-2012, yet many banking issues remain same. We discuss a method estimate capital that firm would need raise if we have another crisis. This measure shortfall is based on publicly available information but conceptually similar stress tests conducted by US and European regulators. argue this summarizes major characteristics systemic risk provides reliable interpretation past current crises.