Talk:Systemic risk
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20060407: This page needs a lot of cleanup work. I don't have time for it today, but will try to get back to it within a few weeks.
However, I will note briefly: The term 'Systemic risk' is NOT principally used in economics and finance for "a collapse of a financial system."
It is used more generally to describe systemic effects within the financial system. For example, one bank failing (or maybe several in a region) is not systemic -- likely just poor bank management, failure to maintain adequate capital ratios, etc. But if depositors in other depository institutions (banks, Savings banks, Credit Unions) begin to withdraw their funds due to a fear (rational or irrational) that their particular bank may not be able to return their deposits to them because of the failure of this one (or these few) other banks, then that is a systemic effect. FWIW, Federal Deposit Insurance is in place to help mitigate this risk in banking (many economists would say "eliminate this risk" but I won't go that far.)
Other types of systemic (contagion) risk are present in the modern financial system.
In short, it does not require a "collapse of the financial system" for systemic risk to be realized.
"[I will also plan to update the risk modeling wiki page in a few weeks to describe a (well documented in the literature) potential mechanism for formal risk modeling to add to systemic risk.]
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[edit] Systemic vs. Systematic
In my Finance textbook, it says systematic risk, not systemic, what's the difference? --70.111.218.254 00:25, 3 December 2006 (UTC)
Even finance professors do not seem to understand the difference: Systemic: of or related to a system; endemic. Systematic: using a system. The proper term is systemic.
[edit] Systemic vs. Non-Systemic
" Systemic risk should also be carefully distinguished from Non-systemic risk, which describes risks which the whole economy faces such as business cycles or wars."
Is this correct? My understanding is that Systemic/Systematic risk relates to events that affect every asset in a market. This would include wars and business cycles. Non-systemic/Unsystematic risk relates to events that affect a specific company. For instance, a large fire at a company's factory (which would obviously be catastrophic to that company, but not to every company in the market.)
[edit] Systemic vs Systematic
I was taught that the two terms are not synonymous, systematic referring to the market as a whole and systemic referring to a sector with sector-specific regulation (eg banking). In the global context, systemic could also apply to a single country and its regulatory structure
[edit] Market risk
Anyone could explain clearly what is the difference between Market risk and systemic risk? They seem to be exactly the same thing to me but two different articles exist... Why? --Bombastus 11:36, 2 October 2007 (UTC)
