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Measuring and testing for the systemically important financial institutions

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  • Carlos Castro
  • Stijn Ferrari

Abstract

This paper analyzes the measure of systemic importance ΔCoVaR proposed by Adrian and Brunnermeier (2009, 2010) within the context of a similar class of risk measures used in the risk management literature. Inaddition, we develop a series of testing procedures, based on ΔCoVaR, toidentify and rank the systemically important institutions. We stress the importance of statistical testing in interpreting the measure of systemicx importance. An empirical application illustrates the testing procedures, using equity data for three European banks.

Suggested Citation

  • Carlos Castro & Stijn Ferrari, 2011. "Measuring and testing for the systemically important financial institutions," Documentos de Trabajo 8779, Universidad del Rosario.
    • Handle: RePEc:col:000092:008779
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    File URL: https://repository.urosario.edu.co/bitstream/handle/10336/10821/8779.pdf
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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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