Tail risk emanating from troubled European banking sectors

Farrukh Javed, Hassan Sabzevari and Nader Virk

Finance Research Letters, 2021, vol. 43, issue C

Abstract: The spillover risk and systemic risk of the troubled banking sectors of Greece, Ireland, Italy, Portugal and Spain (GIIPS) for the rest of the European and the US banking sector are investigated using the conditional value-at-risk (CoVaR) framework. Our results show that the CoVaR estimates are sensitive to the choice of static and dynamic parametrization of volatility and pairwise-correlations. Nevertheless, even the conservative estimates for CoVaR and changes in it display that the magnitude of these risks, originating from GIIPS countries, is large. These risks affect banking of large European and the US banking sectors more than the rest.

Keywords: Systemic risk; CoVaR; Quantile regression; DCC; Correlation (search for similar items in EconPapers)
JEL-codes: C12 C58 F36 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000337

DOI: 10.1016/j.frl.2021.101952

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