The aim of this paper is to conceptualize and design a risk topography that outlines a data acquisition and dissemination process that informs policy makers, researchers and market participants about systemic risk. Our approach emphasizes that systemic risk (i) typically builds up in the background before materializing in a crisis and (ii) is determined by market participants' response to various shocks. To this end we propose a two-step approach: First, regulators elicit from market participants their (partial equilibrium) risk as well as liquidity sensitivities with respect to major risk factors and liquidity scenarios. By doing so, one takes advantage of private sector internal risk models and over time an informative panel data set is obtained. Second, general equilibrium responses and economy-wide system effects are calibrated using this panel data set.
Krishnamurthy, Arvind, Markus Brunnermeier and Gary Gorton. 2012. "Risk Topography." In NBER Macroeconomics Annual 2011, edited by Daron Acemoglu and Michael Woodford, vol. 26, 149-176. University of Chicago Press.