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CoVaR

Author

Listed:
  • Tobias Adrian
  • Markus K. Brunnermeier
Abstract
We propose a measure for systemic risk, ?CoVaR, defined as the difference between the conditional value at risk (CoVaR) of the financial system conditional on an institution being in distress and the CoVaR conditional on the median state of the institution. Our ?CoVaR estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict systemic risk contribution. We provide out-of-sample forecasts of a countercyclical, forward-looking measure of systemic risk and show that the 2006:Q4 value of this measure would have predicted more than one-third of realized ?CoVaR during the financial crisis.

Suggested Citation

  • Tobias Adrian & Markus K. Brunnermeier, 2008. "CoVaR," Staff Reports 348, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:348
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    Other versions of this item:

    • Tobias Adrian & Markus K. Brunnermeier, 2016. "CoVaR," American Economic Review, American Economic Association, vol. 106(7), pages 1705-1741, July.
    • Tobias Adrian & Markus K. Brunnermeier, 2011. "CoVaR," NBER Working Papers 17454, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    value at risk; systemic risk; risk spillovers; financial architecture;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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