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What are the most effective and vulnerable firms in financial crisis? A network representation of CoVaR in an emerging market

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  • Hossein Dastkhan

    (Department of Financial Engineering, Faculty of Financial Sciences, Kharazmi University, Tehran, Iran)

Abstract

In this paper, financial networks are applied to develop new measures of systemic risk. Using the CoVaR as a well-defined systemic risk measure, risk spillovers among different firms are estimated in Tehran Stock Exchange. Networks of systemic risk exposures are represented across time and two indices of vulnerability and systemic importance are introduced to define the most effective and vulnerable firms. The results show that the proposed network-based indices have a good performance to identify the vulnerable and systemically important firms. The results also show that when the market is in periods of financial downturn/crisis, the network interconnectedness was maximized.

Suggested Citation

  • Hossein Dastkhan, 2019. "What are the most effective and vulnerable firms in financial crisis? A network representation of CoVaR in an emerging market," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-31, March.
    • Handle: RePEc:wsi:ijfexx:v:06:y:2019:i:01:n:s2424786319500075
    DOI: 10.1142/S2424786319500075
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    Cited by:

    1. Yujue Wang, 2022. "Compacter networks as a defensive mechanism: How firms clustered during 2015 Financial Crisis in China," Papers 2212.01557, arXiv.org.
    2. Zhu, Pengfei & Tang, Yong & Wei, Yu & Lu, Tuantuan, 2021. "Multidimensional risk spillovers among crude oil, the US and Chinese stock markets: Evidence during the COVID-19 epidemic," Energy, Elsevier, vol. 231(C).

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