Probability equivalent level for CoVaR and VaR

DOI10.1016/J.INSMATHECO.2023.12.004MaRDI QIDQ6199665zbMATH OpenOpenAlexFDO

Authors Patricia Ortega-Jiménez, Franco Pellerey, Miguel A. Sordo, Alfonso Suárez-Llorens

Publication date 21 March 2024

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.insmatheco.2023.12.004

zbMATH Keywords

conditional value at riskcontagion risk measurestochastically increasingsystematic riskvalue at risk

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70)

Review text

The authors study conditions that guarantee, in the bivariate setting, the ordering between VaR and CoVaR, allowing to understand which, among the two measures, is more or less conservative than the other. By doing this, the authors introduce the notion of probability equivalent level of CoVaR-VaR (PELCoV), which is the VaR value of the observable variable for which VaR and CoVaR coincide, and study some of its properties such as uniqueness and boundedness. \newline In particular, it is shown that its properties are entirely explained by the copula that describes the dependence between risks, and a list of copulas is provided for which PELCoV is explicitly available, and for which it is or not bounded. A practical applicative example is also presented.

Recommendations

• Covar of families of copulas
• On dependence consistency of CoVaR and some other systemic risk measures
• On quantile based co-risk measures and their estimation
• On conditional value at risk (CoVaR) for tail-dependent copulas
• On multivariate extensions of the conditional value-at-risk measure

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Cited in

(2)

• Conditional generalized quantiles as systemic risk measures: properties, estimation, and application
• Probability equivalent level for CoVaR and VaR in bivariate student-t copulas with application to foreign exchange risk monitoring

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