Hautsch, Nikolaus Schaumburg, Julia Schienle, Melanie
Year of Publication:
SFB 649 Discussion Paper 2012-053
We propose the realized systemic risk beta as a measure for financial companies' contribution to systemic risk given network interdependence between firms' tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we define the realized systemic risk beta as the total time-varying marginal effect of a firm's Value-at-risk (VaR) on the system's VaR. Suitable statistical inference reveals a multitude of relevant risk spillover channels and determines companies' systemic importance in the U.S. financial system. Our approach can be used to monitor companies' systemic importance allowing for a transparent macroprudential regulation.
Systemic risk contribution systemic risk network Value at Risk network topology two-step quantile regression time-varying parameters