Systemic Risk

Systemic risk refers to the potential risk of a collapse of the entire financial system due to one factor or a combination of factors.

Why is Systemic Risk Important?

Studies examined the relationship between the correlations of stocks in the U.S. stock market and the overall market during the 2007 crisis. From August 2008 to March 2009, there was a freefall in the U.S. equity market, and correlations of stocks with each other dramatically increased from a pre-crisis average correlation level of 27% to over 50%.