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systemic risk sign in to follow this
contribution sign in to follow this
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Measuring and Analysing Marginal Systemic Risk Contribution using CoVaR: A Copula Approach
Year Of Publication: 2012
Month Of Publication: November
Resource Link: Click here to open
Pages: 26
Download Count: 0
View Count: 1557
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 12-28-2012
Publisher: Administrator
Summary
Our work expands on the CoVaR concept proposed by Adrian and Brunnermeier as a tool for the measurement of marginal systemic risk contribution. We first give a mathematical definition of CoVaR_{\alpha}^{s|L^i=l}. Our definition improves the CoVaR concept by expressing CoVaR_{\alpha}^{s|L^i=l} as a function of a state l and of a given probability level \alpha relative to i and s respectively. Based on Copula theory we connect CoVaR_{\alpha}^{s|L^i=l} to the partial derivatives of Copula through their probabilistic interpretation and definitions (Conditional Probability). Using this we provide a closed formula for the calculation of CoVaR_{\alpha}^{s|L^i=l} for a large class of (marginal) distributions and dependence structures (linear and non-linear). Our formula allows a better analysis of systemic risk using CoVaR in the sense that it allows to define CoVaR_{\alpha}^{s|L^i=l} depending on the marginal distributions of the losses of i and s respectively and the copula between L^i and L^s. We discuss the implications of this in the context of the quantification and analysis of systemic risk contributions. %some mathematical This make
Author(s)
Jaeger-Ambrozewicz, Manfred-Erich Sign in to follow this author
Rüdiger-Mastandrea, Barbara Sign in to follow this author
Hakwa, Brice Sign in to follow this author
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