OFR_2016_Financial-Stability-Report

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Value-at-Risk (VaR) Variable Annuity Variation Margin A tool for market risk management that measures the risk of loss of a portfolio. The VaR projects the maximum expected loss for a given time horizon and probability. For example, the VaR over 10 days and with 99 percent certainty measures the most one would expect to lose over a 10-day period, 99 percent of the time. A tax-deferred insurance company contract where the owner can choose investment options whose values fluctuate with the underlying securities, much like mutual funds. Variable annuities may also include minimum guarantees, which may exceed the value of the investment accounts. Payment made by clearing members to the clearinghouse based on price movements of the contracts these members hold. 104 2016 | OFR Financial Stability Report
Bibliography Adrian, Tobias, and Markus Brunnermeier. “CoVaR.” American Economic Review 106, no. 7 (2016, July): 1705– 1741. https://www.aeaweb.org/articles?id=10.1257/aer.20120555 (accessed Oct. 14, 2016). Adrian, Tobias, Daniel Covitz, and Nellie Liang. “Financial Stability Monitoring.” Staff Report no. 601, New York: Federal Reserve Bank of New York, June 2014. https://www.newyorkfed.org/medialibrary/media/research/staff_ reports/sr601.pdf (accessed Sept. 6, 2016). Allahrakha, Meraj, Jill Cetina, and Benjamin Munyan. “Do Higher Capital Standards Always Reduce Bank Risk: The Impact of the Leverage Ratio on the U.S. Triparty Repo Market?” OFR Working Paper, Washington: Office of Financial Research, Forthcoming. A.M. Best Company Inc. Best Special Report: How Have Japanese Life Insurers Coped with Ultra-Low Interest Rates Over Two Decades?, Hong Kong: A.M. Best, April 13, 2016. https://www3.ambest.com//MemberCenter/sMC/ Cust_Existing.aspx?URATINGID=&fs=0&altnum=0&altsrc=0&tl=7&b=0&nextpage=http://www3.ambest. com/ambv/sales/bwpurchase.aspx?record_code=248215 (accessed Oct. 6, 2016). American International Group, Inc. Form 10-K, New York: AIG, Dec. 31, 2006. https://www.sec.gov/Archives/ edgar/data/5272/000095012307003026/y27490e10vk.htm (accessed Oct. 13, 2016). American International Group, Inc. AIG Discloses Counterparties to CDS, GIA and Securities Lending Transactions. Press Release, March 15, 2009: AIG. http://media.corporate-ir.net/media_files/irol/76/76115/releases/031509.pdf (accessed Oct. 13, 2016). Arnold, Martin. “Swift Threat to Suspend Vulnerable Members.” London: Financial Times, June 3, 2016. http:// www.ft.com/cms/s/0/9af78732-28da-11e6-8ba3-cdd781d02d89.html#axzz4En4WBbpr (accessed Oct. 13, 2016). Baklanova, Viktoria, Cecilia Caglio, Marco Cipriani, and Adam Copeland. “The U.S. Bilateral Repo Market: Lessons from a New Survey.” OFR Brief no. 16-01, Washington: Office of Financial Research, Jan. 13, 2016a. financialresearch.gov/briefs/files/OFRbr-2016-01_US-Bilateral-Repo-Market-Lessons-from-Survey.pdf (accessed Sept. 7, 2016). Baklanova, Viktoria, Cecilia Caglio, Frank Keane, and Burt Porter. “A Pilot Survey of Agent Securities Lending Activity.” Working Paper no. 16-08, Washington: Office of Financial Research, Aug. 23, 2016b. https://financialresearch.gov/working-papers/files/OFRwp-2016-08_Pilot-Survey-of-Securities-Lending.pdf (accessed Sept. 7, 2016). Baklanova, Viktoria, Adam Copeland, and Rebecca McCaughrin. “Reference Guide to U.S. Repo and Securities Lending Markets.” OFR Working Paper no. 15-17, Washington: Office of Financial Research, Sept. 9, 2015. https:// financialresearch.gov/working-papers/files/OFRwp-2015-17_Reference-Guide-to-U.S.-Repo-and-Securities- Lending-Markets.pdf (accessed Sept. 27, 2016). Bibliography 105
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OFFICE OF FINANCIAL RESEARCH 2016 F
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Contents Executive Summary ........
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Chapter 2 provides deeper analysis
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of sharp decreases in U.S. equity a
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1 Financial Stability Assessment Ov
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Figure 3. Real GDP Growth (year-ove
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Figure 8. Ten-Year U.S. Treasury Yi
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Monitoring Shadow Banking Risks The
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An earlier OFR paper proposed an ac
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Figure 17. Size, Liquidity, and Con
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Figure 19. Top Systemic Risk Scores
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The analysis pointed to seven key t
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could. In early 2016, investor conc
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earnings or share issuance. But red
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Fund Monitor, the OFR assessed expo
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2.2 Risks in U.S. Nonfinancial Corp
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Figure 31. U.S. Nonfinancial Corpor
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Figure 36. U.S. Corporate Bond Defa
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Commercial Real Estate Prices Have
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2.3 Cybersecurity Incidents Affecti
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Hackers Breach Bangladesh’s Centr
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Figure 42. Banks that Include an Op
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The industry is working with the pu
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Figure 46. U.S. Financial Regulator
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48 2016 | OFR Financial Stability R
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eleased the results of an unprecede
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Figure 49. CCP Default Waterfall ($
Page 60 and 61: Figure 50: CCP Ratios and Amounts f
Page 62 and 63: cause more-prudent CCPs to appear m
Page 64 and 65: 2.5 Pressure on U.S. Life Insurance
Page 66 and 67: The experience of Japan’s life in
Page 68 and 69: 2015). These benefits are effective
Page 70 and 71: Figure 55. Life Insurance Securitie
Page 72 and 73: Drivers of Insurers’ Systemic Ris
Page 74 and 75: 2.6 Systemic Footprints of Largest
Page 76 and 77: Interest Rates and Derivatives Expo
Page 78 and 79: Figure 63. Components of U.S. G-SIB
Page 80 and 81: Figure 66. Five-Year Changes to G-S
Page 82 and 83: 2.7 Deficiencies in Data and Data M
Page 84 and 85: Figure 68. Examples of Key Post-Cri
Page 86 and 87: Broader Adoption of Data Standards
Page 88 and 89: Better Regulatory Sharing Needed Th
Page 90 and 91: The U.S. Census Bureau surveys publ
Page 92 and 93: The group will also consider how th
Page 94 and 95: and contracts would be crucial. The
Page 96 and 97: Figure 72. Scaling of Data Validati
Page 99 and 100: Glossary 10-Year, 10-Year Forward R
Page 101 and 102: Conditional Value-at-Risk (CoVaR) C
Page 103 and 104: Fire Sale Form N-MFP Form PF Fundin
Page 105 and 106: Liquidity Risk Liquidity Transforma
Page 107 and 108: Pension Funded Ratio Pension Risk T
Page 109: Stress Test Supplemental Leverage R
Page 113 and 114: Board of Governors of the Federal R
Page 115 and 116: www.richmondfed.org/~/media/richmon
Page 117 and 118: Her Majesty’s Government and Mars
Page 119 and 120: Paul, Ruma. “Bangladesh hopes to
Page 121: Zetter, Kim. “That Insane, 18M Ba
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