Risk Topography

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The aim of this paper is to conceptualize and design a risk topography that outlines a data acquisition and dissemination process that informs
policymakers, researchers, and market participants about systemic risk. Our approach emphasizes that systemic risk (1) cannot be detected based on measuring cash instruments, for example, balance sheet items or ratios such as leverage and income statement items; (2) typically builds up in the background before materializing in a crisis; and (3) is determined by market participants' endogenous response to various shocks. Our measurement system asks that regulators elicit from market participants their (partial equilibrium) risk as well as liquidity sensitivities (our response indicator) with respect to major risk factors and liquidity scenarios. General equilibrium responses and economy-wide system effects can be calibrated using this panel data set.