Hidden Bibliographic Details
| Other authors / contributors: | López Espinosa, Germán, author.
International Monetary Fund. Monetary and Capital Markets Department, issuing body.
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| ISBN: | 1475545770
9781475545777
9781475504347
9781475517569
1475504349
9781475504347
1475517564
9781475517569
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| Notes: | Includes bibliographical references.
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| Summary: | To date, an operational measure of systemic risk capturing non-linear tail comovement between system-wide and individual bank returns has not yet been developed. This paper proposes an extension of the so-called CoVaR measure that captures the asymmetric response of the banking system to positive and negative shocks to the market-valued balance sheets of individual banks. For the median of our sample of U.S. banks, the relative impact on the system of a fall in individual market value is sevenfold that of an increase. Moreover, the downward bias in systemic risk from ignoring this asymmetric pattern increases with bank size. The conditional tail comovement between the banking system and a top decile bank which is losing market value is 5.4 larger than the unconditional tail comovement versus only 2.2 for banks in the bottom decile. The asymmetric model also produces much better estimates and fitting, and thus improves the capacity to monitor systemic risk. Our results suggest that ignoring asymmetries in tail interdependence may lead to a severe underestimation of systemic risk in a downward market.
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| Other form: | 9781475504347
9781475517569
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| Standard no.: | 10.5089/9781475545777.001
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