CoVaR

Tobias Adrian and Markus Brunnermeier

No 17454, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on institutions being under distress. We define an institution's contribution to systemic risk as the difference between CoVaR conditional on the institution being under distress and the CoVaR in the median state of the institution. From our estimates of CoVaR for the universe of publicly traded financial institutions, we quantify the extent to which characteristics such as leverage, size, and maturity mismatch predict systemic risk contribution. We also provide out of sample forecasts of a countercyclical, forward looking measure of systemic risk and show that the 2006Q4 value of this measure would have predicted more than half of realized covariances during the financial crisis.

JEL-codes: G17 G21 G22 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ets, nep-for and nep-rmg
Note: AP CF EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Tobias Adrian & Markus K. Brunnermeier, 2016. "CoVaR," American Economic Review, American Economic Association, vol. 106(7), pages 1705-1741, July.

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Related works:
Journal Article: CoVaR (2016)
Working Paper: CoVaR (2008)
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