2021
DOI: 10.3390/jrfm14060251
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Systemic Risk Modeling with Lévy Copulas

Abstract: We investigate a systemic risk measure known as CoVaR that represents the value-at-risk (VaR) of a financial system conditional on an institution being under distress. For characterizing and estimating CoVaR, we use the copula approach and introduce the normal tempered stable (NTS) copula based on the Lévy process. We also propose a novel backtesting method for CoVaR by a joint distribution correction. We test the proposed NTS model on the daily S&P 500 index and Dow Jones index with in-sample and out-of-s… Show more

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Cited by 4 publications
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“… See Adrian and Brunnermeier (2016),Huang and Uryasev (2018), andLiu et al (2021) for more details 3 In this paper, we consider the long-only portfolio.…”
mentioning
confidence: 99%
“… See Adrian and Brunnermeier (2016),Huang and Uryasev (2018), andLiu et al (2021) for more details 3 In this paper, we consider the long-only portfolio.…”
mentioning
confidence: 99%