A Critical Discussion on Systemic Risk Measures

Jorge Basilio () and Amilcar Oliveira ()
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Jorge Basilio: Universidade Aberta
Amilcar Oliveira: Universidade Aberta

A chapter in Mindful Topics on Risk Analysis and Design of Experiments, 2022, pp 18-36 from Springer

Abstract: Abstract Risk Analysis is becoming a recurrent subject in research, attracting the attention of researchers in a consistent way. More recently and motivated by the last collapse of the financial system, systemic risk is getting special attention as well as becoming a tool widely applied for detect financial institutions systemic risk contributions. We start with Adrian and Brunnermeier [3] work, where they introduced first time the concept of CoVaR, and $$\varDelta CoVaR$$ Δ C o V a R of a financial institution, as well as a methodology to estimate $$\varDelta CoVaR$$ Δ C o V a R using financial market public data. This paper will then discuss the assumptions taken along that methodology, analyse the characteristics of each risk measured used, and discussed alternatives to measure the individual contribution of a single entity to the systemic risk of a financial system [5]. At the moment, there are not yet a consensus in accepting existing measures and methodologies as good enough to correctly identify the biggest contributors to systemic risk [8]. As conclusion, a modified methodology to estimate individual contributions for systemic risk using market data is presented. Taking as starting point the methodology described by Adrian and Brunnermeier [20], where they introduced first time the concept of CoVaR, that stands to conditional Var, to estimate $$\varDelta CoVaR$$ Δ C o V a R of a financial institution and based in financial market public data, this paper will discuss the assumptions taken along the referred methodology. By analysing the characteristics of each risk measured used, such as Var, CoVaR and $$\varDelta CoVaR$$ Δ C o V a R , this paper will discuss alternative approaches to measure the individual contribution of a single entity to the systemic risk of a financial system.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-06685-6_2

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DOI: 10.1007/978-3-031-06685-6_2

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