Modeling Systemic Risk to the Financial System

Data suggest that the literature related to systemic risk and the financial system is growing at a rate on the order of thousands of publications per annum. In the sections that follow, we summarize recent publications that we have found particularly interesting. We begin with an article by Darrell Duffie, Dean Witter Distinguished Professor of Finance at the Graduate School of Business, Stanford University, and follow with an article by two equally illustrious authors: Andrew Haldane, Executive Director for Financial Stability at the Bank of England, and Robert M. May, a renowned theoretical ecologist. Neither of these articles describes a specific systemic risk model, although their subject matter is certainly germane to the field. We go on to delineate seven models and summarize a valuable study that rigorously evaluates the performance of various systemic risk models.