A Theoretical and Empirical Comparison of Systemic Risk Measures: MES versus CoVaR

Sylvain Benoît, Gilbert Colletaz () and Christophe Hurlin
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Sylvain Benoît: LEDA-SDFi - Stratégie et Dynamiques Financières - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Gilbert Colletaz: LEO - Laboratoire d'Économie d'Orleans [UMR6586] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: We derive several popular systemic risk measures in a common framework and show that they can be expressed as transformations of market risk measures (e.g., beta). We also derive conditions under which the different measures lead to similar rankings of systemically important financial institutions (SIFIs). In an empirical analysis of US financial institutions, we show that (1) different systemic risk measures identify different SIFIs and that (2) firm rankings based on systemic risk estimates mirror rankings obtained by sorting firms on market risk or liabilities. One-factor linear models explain most of the variability of the systemic risk estimates, which indicates that systemic risk measures fall short in capturing the multiple facets of systemic risk.

Keywords: Banking Regulation; Systemically Important Financial Firms; Marginal Expected Shortfall; SRISK; CoVaR; Systemic vs. Systematic Risk (search for similar items in EconPapers)
Date: 2011-12-21
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02058255

DOI: 10.2139/ssrn.1973950

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