Systemic risk of European financial institutions: Estimation and ranking by the Marginal Expected Shortfall

2016 ◽  
Vol 37 ◽  
pp. 113-134 ◽  
Author(s):  
Abdelkader Derbali ◽  
Slaheddine Hallara
Keyword(s):  
Financial Institutions ◽  
Systemic Risk ◽  
Expected Shortfall ◽  
Marginal Expected Shortfall

scholarly journals The Leaders, the Laggers, and the “Vulnerables”

Risks ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 26
Author(s):  
Veni Arakelian ◽  
Shatha Qamhieh Hashem
Keyword(s):  
Financial Crisis ◽  
Bayesian Network ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Expected Shortfall ◽  
Risk Indicators ◽  
Network Structures ◽  
Lag Effect ◽  
Marginal Expected Shortfall ◽  
The Individual

We examine the lead-lag effect between the large and the small capitalization financial institutions by constructing two global weekly rebalanced indices. We focus on the 10% of stocks that “survived” all the rebalancings by remaining constituents of the indices. We sort them according to their systemic importance using the marginal expected shortfall (MES), which measures the individual institutions’ vulnerability over the market, the network based MES, which captures the vulnerability of the risks generated by institutions’ interrelations, and the Bayesian network based MES, which takes into account different network structures among institutions’ interrelations. We also check if the lead-lag effect holds in terms of systemic risk implying systemic risk transmission from the large to the small capitalization, concluding a mixed behavior compared to the index returns. Additionally, we find that all the systemic risk indicators increase their magnitude during the financial crisis.

scholarly journals Backtesting Marginal Expected Shortfall and Related Systemic Risk Measures

2020 ◽  
Author(s):  
Denisa Banulescu-Radu ◽  
Christophe Hurlin ◽  
Jérémy Leymarie ◽  
Olivier Scaillet
Keyword(s):  
At Risk ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Value At Risk ◽  
Risk Measures ◽  
Risk Measure ◽  
Expected Shortfall ◽  
Conditional Value At Risk ◽  
Finite Sample ◽  
Marginal Expected Shortfall

This paper proposes an original approach for backtesting systemic risk measures. This backtesting approach makes it possible to assess the systemic risk measure forecasts used to identify the financial institutions that contribute the most to the overall risk in the financial system. Our procedure is based on simple tests similar to those generally used to backtest the standard market risk measures such as value-at-risk or expected shortfall. We introduce a concept of violation associated with the marginal expected shortfall (MES), and we define unconditional coverage and independence tests for these violations. We can generalize these tests to any MES-based systemic risk measures such as the systemic expected shortfall (SES), the systemic risk measure (SRISK), or the delta conditional value-at-risk ([Formula: see text]CoVaR). We study their asymptotic properties in the presence of estimation risk and investigate their finite sample performance via Monte Carlo simulations. An empirical application to a panel of U.S. financial institutions is conducted to assess the validity of MES, SRISK, and [Formula: see text]CoVaR forecasts issued from a bivariate GARCH model with a dynamic conditional correlation structure. Our results show that this model provides valid forecasts for MES and SRISK when considering a medium-term horizon. Finally, we propose an early warning system indicator for future systemic crises deduced from these backtests. Our indicator quantifies how much is the measurement error issued by a systemic risk forecast at a given point in time which can serve for the early detection of global market reversals. This paper was accepted by Kay Giesecke, finance.

scholarly journals Do Bond Investors Price Tail Risk Exposures of Financial Institutions?

2020 ◽  
pp. 2150003
Author(s):  
Sudheer Chava ◽  
Rohan Ganduri ◽  
Vijay Yerramilli
Keyword(s):  
Financial Institutions ◽  
Large Scale ◽  
Expected Shortfall ◽  
Bond Markets ◽  
Tail Risk ◽  
Yield Spreads ◽  
Depository Institutions ◽  
Bond Yield ◽  
Marginal Expected Shortfall ◽  
The Relationship

We analyze whether bond investors price tail risk exposures of financial institutions using a comprehensive sample of bond issuances by U.S. financial institutions. Although primary bond yield spreads increase with an institution’s own tail risk (expected shortfall), systematic tail risk (marginal expected shortfall) of the institution doesn’t affect its yields. The relationship between yield spreads and tail risk is significantly weaker for depository institutions, large institutions, government-sponsored entities, politically-connected institutions, and in periods following large-scale bailouts of financial institutions. Overall, our results suggest that implicit bailout guarantees of financial institutions can exacerbate moral hazard in bond markets and weaken market discipline.

scholarly journals THE DETERMINANTS OF SYSTEMIC RISK: EVIDENCE FROM INDONESIAN COMMERCIAL BANKS

2020 ◽  
Vol 23 (1) ◽  
pp. 101-120
Author(s):  
Mutiara Aini ◽  
Deddy Priatmodjo Koesrindartoto
Keyword(s):  
At Risk ◽  
Systemic Risk ◽  
Commercial Banks ◽  
Value At Risk ◽  
Expected Shortfall ◽  
Quarterly Data ◽  
Marginal Expected Shortfall ◽  
The Government

This paper examines the determinants of systemic risk across Indonesian commercialbanks using quarterly data from 2001Q4 to 2017Q4. Employing four measures ofsystemic risk, namely value-at-risk (VaR), historical marginal expected shortfall(MESH), marginal expected shortfall from GARCH-DCC (MESdcc), and long-runmarginal expected shortfall (LRMES), we find that bank size is positively related tosystemic risk, whereas banks and economic loan activity are negatively related tosystemic risk. These findings suggest that the government needs to regulate loanactivities and to monitor big banks as they have significant impacts on bank systemicrisk.

Essays on measuring systemic risk

2019 ◽  
Author(s):  
Χριστόφορος Κωνσταντάτος
Keyword(s):  
At Risk ◽  
Systemic Risk ◽  
Value At Risk ◽  
Expected Shortfall ◽  
Conditional Value At Risk ◽  
Lehman Brothers ◽  
Marginal Expected Shortfall

Η παρούσα διατριβή ερευνά διάφορα μέτρα συστημικού κινδύνου, αναγνωρίζοντας – προσδιορίζοντάς τα συστημικά τραπεζικά ιδρύματα της Ευρωπαϊκής Νομισματικής Ένωσής (Ευρωζώνης). Επίσης εξετάζει τις ακραίες κινήσεις της τιμής των μετοχών των τραπεζικών ιδρυμάτων της Ευρωζώνης. Η παρούσα αποτελείται από τρία κεφάλαια εστιάζοντας στα τραπεζικά ιδρύματα των Ηνωμένων Πολιτειών και της Ευρωζώνης. Το Κεφάλαιο 2 συγκρίνει τα συστημικά μέτρα τα επονομαζόμενα (i) Delta Conditional Value at Risk, (ii) Marginal Expected Shortfall και (iii) Systemic RISK. Τα αποτελέσματα καταδεικνύουν ότι τα τραπεζικά ιδρύματα της ζώνης του ευρώ συνεισφέρουν τον υψηλότερο κίνδυνο στο χρηματοπιστωτικό σύστημα (συμβολή στον συστημικό κίνδυνο). Επιπροσθέτως είναι και τα πιο ευάλωτα τραπεζικά ιδρύματα σε περίπτωση ύφεσης. Τα τραπεζικά ιδρύματα με τις υψηλότερες αναμενόμενες απώλειες σε περίπτωση ακραίων γεγονότων είναι κυρίως τα τραπεζικά ιδρύματα των ΗΠΑ. Το Κεφάλαιο 3 διερευνά τον συστημικό κίνδυνο που διαχέεται μεταξύ των τραπεζικών ιδρυμάτων των Ηνωμένων Πολιτειών και της Ευρωζώνης κάνοντας χρήση του μέτρου Conditional Value at Risk. Τα αποτελέσματα καταδεικνύουν ότι δύο από τα μεγαλύτερα γερμανικά τραπεζικά ιδρύματα συγκαταλέγονται στα πιο ευάλωτα τραπεζικά ιδρύματα της ζώνης του ευρώ στον συστημικό κινδύνου που προέρχονται από τα αντίστοιχα αμερικανικά τραπεζικά ιδρύματα, επίσης παρατηρείτε υψηλός βαθμός έκθεσης των αμερικανικών τραπεζικών ιδρυμάτων στα τρία μεγαλύτερα γαλλικά τραπεζικά ιδρύματα. Το Κεφάλαιο 4 ερευνά τη δομή εξάρτησης των ουρών των είκοσι τεσσάρων μεγαλύτερων τραπεζών στη ζώνη του ευρώ πριν και μετά την κατάρρευση της Lehman Brothers. Τα αποτελέσματα καταδεικνύουν ότι στη μετά κρίση περίοδο το επίπεδο της ακραίας συσχέτισης αυξάνεται σημαντικά στα τραπεζικά ιδρύματα του πυρήνα του ευρώ. Επίσης, μεταξύ των χωρών που λαμβάνουν δέσμη μέτρων διάσωσης τα μεγαλύτερα τραπεζικά ιδρύματα σε Ελλάδα και Ιρλανδία παρατηρείτε ότι μείωσαν την ακραία συσχέτιση με τα αντίστοιχα τραπεζικά ιδρύματα της ζώνης του ευρώ.

scholarly journals Explaining the Systemic Risk Model Using the Marginal Expected Shortfall Approach (MES) for the Banks Listed on the Tehran Stock Exchange

2020 ◽  
Vol 25 (2) ◽  
pp. 115-134
Author(s):  
Kourosh Asayesh ◽  
Mirfeiz Fallahshams ◽  
Hossein Jahangirnia ◽  
Reza Gholami Jamkarani ◽  
◽  
...  
Keyword(s):  
Systemic Risk ◽  
Risk Model ◽  
Stock Exchange ◽  
Expected Shortfall ◽  
Marginal Expected Shortfall

scholarly journals Backtesting Marginal Expected Shortfall and Related Systemic Risk Measures

2019 ◽  
Author(s):  
Denisa Banulescu ◽  
Christophe Hurlin ◽  
Jeremy Leymarie ◽  
Olivier Scaillet
Keyword(s):  
Systemic Risk ◽  
Risk Measures ◽  
Expected Shortfall ◽  
Marginal Expected Shortfall
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