Nobel prize winner: Systemic risk is hard to define

This week, the Royal Swedish Academy of Sciences awarded University of Chicago professor Lars Peter Hansen the Nobel Memorial Prize in Economic Sciences for his empirical analysis of risk and asset prices. Hansen warned in his February paper "Challenges in Identifying and Measuring Systemic Risk" that while the Dodd-Frank Act has regulators imposing limitations on risk and firms that create it, the term has become a catchall phrase to "rationalize regulatory discretion." Hansen instead recommends new regulations should pressure public-sector research groups to develop useful measurements of risk that should to create policy in a thoughtful and measured method.

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