Systemic risk measurement in the Eurozone - A multivariate GARCH estimation of CoVaR
(2015) NEKN01 20151Department of Economics
- Abstract
- In this essay the systemic risk contributions of financial institutions in the European Monetary
Union are analyzed. For this purpose the CoVaR measure, first introduced by Adrian and
Brunnermeier (2011), is applied. The definition of CoVaR is changed in the way that 1) the
definition of financial distress is changed from an institution being exactly at its VaR-level to
being at most at its VaR, and 2) the CoVaR measure is extended to allow for measuring the
systemic risk contribution of a group of banks. For the calculations of CoVaR an underlying
student t-distribution for the returns is assumed. Volatility and time-varying correlations
between the institutions and the system are modeled using a GARCH-DCC approach. The
... (More) - In this essay the systemic risk contributions of financial institutions in the European Monetary
Union are analyzed. For this purpose the CoVaR measure, first introduced by Adrian and
Brunnermeier (2011), is applied. The definition of CoVaR is changed in the way that 1) the
definition of financial distress is changed from an institution being exactly at its VaR-level to
being at most at its VaR, and 2) the CoVaR measure is extended to allow for measuring the
systemic risk contribution of a group of banks. For the calculations of CoVaR an underlying
student t-distribution for the returns is assumed. Volatility and time-varying correlations
between the institutions and the system are modeled using a GARCH-DCC approach. The
systemic risk contribution is then obtained by solving numerically for ∆CoVaR. The
calculations are based on daily return data of 32 banks from 10 Eurozone countries covering
the period 1 st May 2005 to 1 st May 2015. The analysis of the results of the collective systemic
risk contribution by country receives extra attention. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/7855906
- author
- Vogl, Christian LU
- supervisor
-
- Bujar Huskaj LU
- organization
- course
- NEKN01 20151
- year
- 2015
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- DCC model, Multivariate GARCH, CoVaR, Systemic risk
- language
- English
- id
- 7855906
- date added to LUP
- 2015-09-15 12:36:23
- date last changed
- 2015-09-15 12:36:23
@misc{7855906, abstract = {{In this essay the systemic risk contributions of financial institutions in the European Monetary Union are analyzed. For this purpose the CoVaR measure, first introduced by Adrian and Brunnermeier (2011), is applied. The definition of CoVaR is changed in the way that 1) the definition of financial distress is changed from an institution being exactly at its VaR-level to being at most at its VaR, and 2) the CoVaR measure is extended to allow for measuring the systemic risk contribution of a group of banks. For the calculations of CoVaR an underlying student t-distribution for the returns is assumed. Volatility and time-varying correlations between the institutions and the system are modeled using a GARCH-DCC approach. The systemic risk contribution is then obtained by solving numerically for ∆CoVaR. The calculations are based on daily return data of 32 banks from 10 Eurozone countries covering the period 1 st May 2005 to 1 st May 2015. The analysis of the results of the collective systemic risk contribution by country receives extra attention.}}, author = {{Vogl, Christian}}, language = {{eng}}, note = {{Student Paper}}, title = {{Systemic risk measurement in the Eurozone - A multivariate GARCH estimation of CoVaR}}, year = {{2015}}, }