Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162219
Authors: 
Khalifa, Ahmed
Caporin, Massimiliano
Costola, Michele
Hammoudeh, Shawkat
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper Series 172
Abstract: 
This paper examines the relationship between systemic risk measures across 546 financial institutions in major petroleum-based economies and oil movements. In this paper, we follow two steps. In the first step, we estimate the delta conditional VaR (CoVaR) for the financial institutions and verify the interdependence between the systemic risk and oil, both on a graphical basis and by means of statistical tests. Further, we analyse the financial companies' connectedness through Granger causality-based networks, augmented with oil exposures. We observe the presence of elevated increases in the CoVaR levels, corresponding to the subprime and global crises, which are exogenous shocks to the financial institutions located in the GCC countries. In the second step, we consider the CoVaR by introducing oil returns as a state variable to detect if there is an improvement in the systemic risk measurement. The results provide evidence in favour of risk measurement improvements by accounting for oil returns in the risk functions, as monitored by coverage tests.
Subjects: 
systemic risk
risk measurement
VaR
CoVaR
Oil
financial institutions
petroleum-based economies
JEL: 
C22
C58
G01
G17
G20
G21
G32
Document Type: 
Working Paper

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