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Systemic Risk, Pension Funds, Insurers, Asset Managers [25]

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Bullet points include: Assets. Asset Portfolio. Liabilities. Secured debt (Super-senior). Customer liabilities (Senior). Tier 1, Tier 2 capital (Mezzanine). Equity / Back-stop. Customer liabilities potentially uncovered (so fall to protection schemes / government?) if large enough adverse move in assets versus liabilities. C.f. (regulatory) capital designed to absorb unexpected losses. Hence tiering. We can also apply same waterfall concept to entire financial or economic system (with asset portfolio now consisting of multiple firms)

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