Even if individual banks are good at forecasting risk using VaR models,there may still be problems because losses may occur at several banks at the same time due to the interdependency of the financial system,magnifying each bank's risk exposure and possibly causing a major problem for regulators.The book calls this:
A)systemic risk.
B)operational risk.
C)credit risk.
D)market risk.
E)liquidity risk.

Question

Quizplus · Accepted Answer

The scenario described in the question refers to systemic risk, which is the risk of a widespread financial crisis or collapse due to the interconnectedness of financial institutions and markets. VaR models may not account for systemic risk, and losses at multiple banks could trigger a domino effect that affects the entire financial system, making it difficult for regulators to contain the damage.

Even If Individual Banks Are Good at Forecasting Risk Using