Measuring and testing for the systemically important financial institutions

Carlos Castro, Stijn Ferrari

Research output: Contribution to journalArticlepeer-review

37 Scopus citations

Abstract

This paper analyzes δ. CoVaR proposed by Adrian and Brunnermeier (2011) as a tool for identifying/ranking systemically important institutions. We develop a test of significance of δ. CoVaR that allows determining whether or not a financial institution can be classified as being systemically important on the basis of the estimated systemic risk contribution, as well as a test of dominance aimed at testing whether or not, according to δ. CoVaR, one financial institution is more systemically important than another. We provide an empirical application on a sample of 26 large European banks to show the importance of statistical testing when using δ. CoVaR, and more generally also other market-based systemic risk measures, in this context.

Original languageEnglish (US)
Pages (from-to)1-14
Number of pages14
JournalJournal of Empirical Finance
Volume25
DOIs
StatePublished - Jan 2014

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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