Explain the concept of systemic risk and how it differs from individual institution risk, including examples of recent systemic events.

Systemic risk refers to the risk of failure or collapse of an entire financial system, triggered by the failure of one or more interconnected institutions. This risk arises from the interconnectedness and interdependence of financial institutions, markets, and economies. When one institution fails, it can create a domino effect, impacting other institutions and ultimately jeopardizing the stability of the entire system. This is unlike individual institution risk, which focuses on the risk of failure of a specific financial institution due to its own internal factors, such as poor management, inadequate capital, or excessive leverage. Systemic risk arises from various sources, including: 1. Interconnectedness: The intricate web of relationships between financial institutions, including lending, borrowing, and trading, creates a chain reaction where the failure ....