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Measuring and testing for the systemically important financial institutions

  • Carlos Castro

    ()

    (Faculty of Economics, Universidad del Rosario, Colombia)

  • Stijn Ferrari

    ()

    (National Bank of Belgium)

This paper analyses Delta CoVaR proposed by Adrian and Brunnermeier (2008) as a tool for identifying/ranking systemically important institutions and assessing interconnectedness. We develop a test of significance of Delta CoVaR that allows determining whether or not a financial institution can be classified as being systemically important on the basis of the estimated systemic risk contribution, as well as a test of dominance aimed at testing whether or not, according to Delta CoVaR, one financial institution is more systemically important than another. We provide two applications on a sample of 26 large European banks to show the importance of statistical testing when using Delta CoVaR, and more generally also other market-based systemic risk measures, in this context.

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File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp228en.pdf
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Paper provided by National Bank of Belgium in its series Working Paper Research with number 228.

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Length: 55 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:nbb:reswpp:201210-228
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