Bank Trading Risk and Systemic Risk
40 Pages Posted: 4 Feb 2005 Last revised: 28 Feb 2021
Date Written: January 2005
This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The overall picture from these preliminary results is that there is a fair amount of diversification across banks and within banks across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the post-1998 period has witnessed an increase in volatility of trading revenues.
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