Finance-Insurance
Time: 11.00 am
Date: 24th of April 2025
Room 3001

Andreas HEINEN (Universite de Cergy-Pontoise.) “Give and Take: Measuring Systemic Risk with Non-Exchangeable Dependence”

Abstract : Non-exchangeable dependence breaks the symmetry between the response of an individual firm to market distress and the reaction of the market to individual firm distress. We use a non-exchangeable bivariate copula to model the joint distribution of the daily returns of a set of major U.S. financial institutions and of the market index for the 2001-2021 period. Based on this model, we compute systemic risk measures such as CoVaR, Exposure-CoVaR, and MES. We derive closed-form expressions for CoVaR and MES, that allow us to relate the shape parameters of the non-exchangeable Clayton copula, to the notions of systemicness and vulnerability. We further backtest the systemic risk measures, both in- and out-of-sample. We find that measuring systemic risk with a non-exchangeable copula outperforms its exchangeable counterpart.

Joint Work : Sangwon Lee, UCLY, ESDES

Organizers:  Jean-David FERMANIAN