Systemic Risk

Systemic risk is the probability that the failure of one institution or market segment triggers a cascade of failures across the entire financial system. It is not the sum of individual risks; it is an emergent property of the network topology connecting institutions. The 2008 crisis demonstrated that systemic risk concentrates not in the largest banks but in the nodes with the highest betweenness centrality — the invisible intermediaries that everyone relies on but no one monitors.