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A Theoretical and Empirical Comparison of Systemic Risk Measures

47 Pages Posted: 21 Dec 2011 Last revised: 21 Jan 2014

Sylvain Benoit

Université Paris Dauphine - LEDa-SDFi

Gilbert Colletaz

University of Orleans

Christophe Hurlin

University of Orleans

Christophe Perignon

HEC Paris - Finance Department

Date Written: June 18, 2013

Abstract

We derive several popular systemic risk measures in a common framework and show that they can be expressed as transformations of market risk measures (e.g., beta). We also derive conditions under which the different measures lead to similar rankings of systemically important financial institutions (SIFIs). In an empirical analysis of US financial institutions, we show that (1) different systemic risk measures identify different SIFIs and that (2) firm rankings based on systemic risk estimates mirror rankings obtained by sorting firms on market risk or liabilities. One-factor linear models explain most of the variability of the systemic risk estimates, which indicates that systemic risk measures fall short in capturing the multiple facets of systemic risk.

Keywords: Banking Regulation, Systemically Important Financial Firms, Marginal Expected Shortfall, SRISK, CoVaR, Systemic vs. Systematic Risk

JEL Classification: G01, G32

Suggested Citation

Benoit, Sylvain and Colletaz, Gilbert and Hurlin, Christophe and Perignon, Christophe, A Theoretical and Empirical Comparison of Systemic Risk Measures (June 18, 2013). HEC Paris Research Paper No. FIN-2014-1030. Available at SSRN: https://ssrn.com/abstract=1973950 or http://dx.doi.org/10.2139/ssrn.1973950

Sylvain Benoit (Contact Author)

Université Paris Dauphine - LEDa-SDFi ( email )

Place du Maréchal de Lattre de Tassigny
Paris, Cedex 16 75775
France

Gilbert Colletaz

University of Orleans ( email )

Rue de Blois
B.P. 6739
45067 Orleans Cedex 2, Orleans cedex 2 45067
France

Christophe Hurlin

University of Orleans ( email )

Université d'Orléans
Rue de Blois B.P. 6739 45
France

Christophe Perignon

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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