CoVaR

Zabczyk, Pawel; Brunnermeier, Markus K.

doi:10.1257/aer.20120555

Cited by 1,913 publications

(1,419 citation statements)

References 57 publications

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“…CCBs are debt instruments that automatically convert to equity if and when the issuing firm or bank reaches a specified level of financial distress. While qualitative discussions of CCBs 1 The bank bailouts during the subprime crisis reflect a failure of the regulatory principles created under the 1991 Federal Deposit Insurance Corporation Improvement Act (FDICIA) and specifically of its requirement that bank regulators take "prompt corrective action" (PCA) in response to declining bank capital ratios. Eisenbeis and Wall (2002) provide a detailed discussion of FDICIA and its PCA requirements.…”

Section: Introductionmentioning

confidence: 99%

Contingent Convertible Bonds and Capital Structure Decisions

2015

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This paper provides a formal model of contingent convertible bonds (CCBs), a new instrument offering potential value as a component of corporate capital structures for all types of firms, as well as being considered for the reform of prudential bank regulation following the recent financial crisis. CCBs are debt instruments that automatically convert to equity if and when the issuing firm or bank reaches a specified level of financial distress. CCBs have the potential to avoid bank bailouts of the type that occurred during the subprime mortgage crisis when banks could not raise sufficient new capital and bank regulators feared the consequences if systemically important banks failed. While qualitative discussions of CCBs are available in the literature, this is the first paper to develop a formal model of their properties. The paper provides analytic propositions concerning CCB attributes and develops implications for structuring CCBs to maximize their general benefits for corporations and their specific benefits for prudential bank regulation.

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Section: Introductionmentioning

confidence: 99%

Contingent Convertible Bonds and Capital Structure Decisions

2015

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“…We estimate systemic risk according to the SRISK measure proposed by Brownless and Engel (2015) and the Delta CoVaR developed by Adrian and Brunnermeier (2011). We then investigate the main drivers of the SRISK measure, using information on bank-level cost of equity and fundamental information on total assets, investments, and non-performing loans, and market-level characteristics.…”

Section: Sample and Methodologymentioning

confidence: 99%

“…Besides the estimation of the SRISK and its components, we also estimate the Delta CoVaR developed by Adrian and Brunnermeier (2011). It corresponds to the VaR of market returns conditional on a critical event on the returns of a bank i.…”

Section: Srisk and Co-var Measuresmentioning

confidence: 99%

“…The novel risk measures that we employ are currently widely discussed in academia and readily available in the public domain: SRISK has been developed by Brownless and Engle (2015) and Delta CoVaR by Adrian and Brunnermeier (2011). While SRISK can be viewed as an aggregate measures of banks' exposures to systemic risk, Delta CoVar is an aggregate measure of banks' contribution to aggregate risk.…”

Section: Introductionmentioning

confidence: 99%

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Did the Basel Process of Capital Regulation Enhance the Resiliency of European Banks

Gehrig

Iannino

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper analyses the evolution of measures of the safety and soundness of the European banking sector during the various stages of the Basel process of capital regulation. With the help of SRISK and Delta CoVaR we trace systemic risk and measures of systematic risk as the Basel process unfolds. We observe that, though systematic risk for European banks has been moderately decreasing over the last three decades, exposure to systemic risk has heightened considerably especially for the largest systemic banks. While the Basel process has succeeded in containing systemic risk for smaller banks, it has been less successful for the largest institutions. By exploiting the option of self-regulation embodied in the choice of internal models, the latter effectively seem to have increased their exposure to systemic risk as reflected in increasing SRISK. Hence, the sub-prime crisis found especially the largest and more systemic banks ill-prepared and lacking resiliency. This condition has even aggravated during the European sovereign crisis. Banking Union has not (yet) brought about a significant increase in the safety and soundness of the European banking system.

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“…Empirically, our research is related to the contributions to systemic importance measures like Systemic Expected Shortfall (SES) and the Marginal Expected Shortfall (MES) proposed by Acharya et al (2012) based on banks' undercapitalization, the countercyclical prudential regulation highlighted by the Conditional Value at Risk (CoVaR) of Adrian and Brunnermeier (2016) or the SDSVaR method (State-Dependent Sensitivity VaR) developed by Adams et al (2014) that reflects the contagion effects within different states of the economy. More recently, authors developed measures to identify SIFIs based on interbank positions (Drehmann and Tarashev, 2013), sovereign interlinkages (Correa et al, 2014), cross-border linkages (Minoiu et al, 2015) or network analysis (Cont et al, 2013;Hautsch et al, 2015;Betz et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Banks’ Vulnerability and Financial Openness across Central and Eastern Europe

Nistor

2017

Studia Universitatis Babes-Bolyai Oeconomica

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This paper investigates the impact of the degree of capital account openness on banks' exposure to extreme events during the period 2005-2012 using a sample of financial institutions from Central and Eastern Europe. The empirical output highlights a positive and strongly significant impact of a higher degree of financial openness on banks' systemic vulnerability. Robust findings suggest that this harmful effect is lower for foreign owned banks or for those whose bank holding company signed one or more Vienna Initiative commitment letters. On the other side, tighter capital regulations and private monitoring policies enhance the positive impact of a higher degree of capital accounts openness on banks' vulnerability to systemic events.JEL classification: G21, G28, G32

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CoVaR

Cited by 1,913 publications

References 57 publications

Contingent Convertible Bonds and Capital Structure Decisions

Contingent Convertible Bonds and Capital Structure Decisions

Did the Basel Process of Capital Regulation Enhance the Resiliency of European Banks

Banks’ Vulnerability and Financial Openness across Central and Eastern Europe

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