Measurement and Forecasting of Systemic Risk: A Vine Copula Grouped-CoES Approach

Huiting Duan, Jinghu Yu and Linxiao Wei ()
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Huiting Duan: College of Science, Wuhan University of Technology, Wuhan 430070, China
Jinghu Yu: College of Science, Wuhan University of Technology, Wuhan 430070, China
Linxiao Wei: College of Science, Wuhan University of Technology, Wuhan 430070, China

Mathematics, 2024, vol. 12, issue 8, 1-18

Abstract: Measuring systemic risk plays an important role in financial risk management to control systemic risk. By means of a vine copula grouped-CoES method, this paper aims to measure the systemic risk of Chinese financial markets. The empirical study indicates that the banking industry has a low risk and a strong ability to resist risks, but also contributes the most of the systemic risk. On the other hand, insurance companies and securities have high ES but low Δ CoES, indicating their low risk tolerance and small contribution to the systemic risk. Furthermore, this study employs a sliding window in Monte Carlo simulation to forecast systemic risk. The findings of this paper suggest that different types of financial industries should adopt different systemic risk measures.

Keywords: vine copula grouped model; CoES; systemic risk; rolling of Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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