workshop_technical_capabilities_necessary_systemic_risk

board on mathematical sciences and their applications

November 21, 2009


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Workshop on Technical Capabilities Necessary for Systemic Risk Regulation

Preliminary Agenda

Tuesday, November 3, 2009

Members’ Room, National Academy of Sciences Building

21^st and C Streets, N.W.

Washington, D.C.

8:00 Continental breakfast in meeting room

8:30 Welcome Charles Vest, President, National Academy of Engineering

8:40 Goals of the workshop Charles M. Lucas, Deer Isle Consulting, program chair

8:50 Kill All the Quants? Models vs. Mania in Financial Crises, Andrew W. Lo, MIT

9:20 Market-Based Mechanisms to Reduce Systemic Risk, Myron Scholes, Stanford University

9:50 Long-Term Risks and OTC Derivatives, Robert Engle, NYU

10:20 Comments on the three plenary talks and how they link to the charge to the break-out groups, Christine Cumming, Federal Reserve Bank of New York

10:40 Break

11:00 Three break-out sessions in parallel.

Each break-out group will examine the same four questions, but with different emphases. The four questions are:

What data and analysis would have helped understand and manage conditions leading to the current crisis?
What leading indicators of potential trouble should be collected and analyzed?
To what extent can mathematical methods help in the management of systemic risk?
How can we build the capability for determining a firm’s contribution to systemic risk?

Break-out group on Measurement and Monitoring. This group will examine the four questions with an emphasis on what phenomena need to be measured in order to understand systemic risk, what data need to be collected to monitor it, and at what level of granularity.

Break-out group on Analysis and Forecasting. This group will examine the four questions with an emphasis on exploring the existing or potential technical capabilities for detecting and modeling systemic risk. Is it likely that we can identify generic early warning signs of systemic events? What lines of research might build this capability?

Break-out group on Translating Knowledge into Practice. This group will examine the four questions with an emphasis on aspects such as what scale of data collection, analysis, research, and supervision will be needed in a national systemic risk regulator.

12:30 Lunch

1:15 Plenary session: reports from break-out groups

2:00 Synthesize the previous discussions: What data and analytical capabilities must be assembled as a foundation for systemic risk regulation? What related research will be needed? How big an effort will be required? Should it be a federal operation or joint with other players (e.g., academia, NBER)? Moderator: Tanya Beder, SBCC Group

3:45 Wrap-up comments

4:00 Adjourn

Background Reading Supplied by Workshop Participants

Barry Shachter - Brookings Papers on Economic Identity	Barry Schachter - Rethinking the Financial Network
Penny Cagan - Where Do We Go From Here?	Penny Cagan - First Risk Case Studies
David Rowe - Flying Blind	David Rowe - Fostering Opacity
David Rowe - Markets Are Not Magic	David Rowe - Second Order Uncertainty
David Rowe - The Dangers of Complexity	David Rowe - Systemic Risk Capital
Allan Mendelowitz - Research and Analytics	Allan Mendelowitz - Data Management
Allan Mendelowitz - Financial Regulations	Allan Mendelowitz - Out With Outsourcing of Regulation
Marco Galbiati - Emergence of Networks In Large-value Payment Systems	Tobias Adrian - CoVaR