Title: Systemic risk measures: SRISK and CoVaR under dynamic volatility matrix models
Authors: Chuan-Hsiang Han - National Tsing-Hua University (Taiwan) [presenting]
Abstract: Systemic risk is an important measure for financial stability in the situation of financial crisis. A two-step procedure is proposed for systemic risk estimation under the stochastic volatility matrix models. The first step utilizes Fourier transform method for dynamic volatility matrix estimation. The second step conducts a rigorous proof of asymptotic optimal importance sampling estimators for rare event simulations. For empirical results, we find that the systemic risk can be useful to measure the stability of financial system. The ranking of systemically important financial institutions (SIFIs) identified by common systemic risk measures such as SRISK and CoVaR are compared in the framework of Spearman correlation. Systemic risks of markets in the US, China and Taiwan during the financial crisis period between 2008 and 2010 are presented.