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Research Seminar Series in Statistics and Mathematics

Wirtschaftsuniversität Wien, Departments 4 D4.4.00809:00 - 10:30

Type Lecture / discussion
LanguageEnglish
SpeakerStefan Thurner (Center for Medical Statistics, Informatics, and Intelligent Systems, Medical University of Vienna)
Organizer Institut für Statistik und Mathematik
Contact katrin.artner@wu.ac.at

Stefan Thurner (Center for Medical Statistics, Informatics, and Intelligent Systems, Medical University of Vienna) about "Elimination of systemic risk in financial markets"

The Institute for Statistics and Mathematics (Department of Finance, Accounting and Statistics) cordially invites everyone interested to attend the talks in our Research Seminar Series, where internationally renowned scholars from leading universities present and discuss their (working) papers.
No registration required.

The list of talks for the summer term 2019 is available via the following link: https://www.wu.ac.at/en/statmath/resseminar

Abstract:
Systemic risk in financial markets arises—to a large extent—through the interconnectedness of agents through financial contracts. We show that the systemic risk level of every player in a financial system can be quantified by simple network measures. With actual central bank data of Austria and Mexico we are able to compute the total expected systemic losses of an economy, a number that allows us to estimate the cost of a financial crises. We can further show on real data that it is possible to compute the systemic risk contribution of every single transaction in the financial system. We propose a smart financial transaction tax that incentivizes players to avoid systemically risky transactions. Avoiding this tax effectively restructures the topology of financial networks so that large-scale contagion events become impossible. We can prove the existence of a systemically risk-optimal equilibrium under this tax. An agent based model demonstrates that this Systemic Risk Tax practically eliminates the network-component of systemic risk in a system.



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