Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/88728 
Year of Publication: 
2013
Series/Report no.: 
SAFE Working Paper No. 25
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
In this paper, we propose a novel approach on how to estimate systemic risk and identify its key determinants. For all US financial companies with publicly traded equity options, we extract their option-implied value-at-risks (VaRs) and measure the spillover effects between individual company VaRs and the option-implied VaR of an US financial index. First, we study the spillover effect of increasing company risks on the financial sector. Second, we analyze which companies are most affected if the tail risk of the financial sector increases. We find that key accounting and market valuation metrics such as size, leverage, balance sheet composition, market-to-book ratio and earnings have a significant influence on the systemic risk profile of a financial institution. In contrast to earlier studies, the employed panel vector autoregression (PVAR) estimator allows for a causal interpretation of the results.
Subjects: 
Systemic risk
Value-at-risk
Equity options
Implied volatility
JEL: 
G01
G28
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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