The Conditional Value-at-Risk (CoVaR) has been proposed by [1] to measure the impact of a company in distress on the Value-at-Risk (VaR) of the financial system. We propose here an extension of the CoVaR, that is, the Conditional Quantile-Located VaR (QL-CoVaR), that better deals with tail events, when spillover effects impact the stability of the entire system. In fact, the QL-CoVaR is estimated by assuming that the financial system and the individual companies simultaneously lie in the left tails of their distributions.
Conditional Quantile-Located VaR
Bonaccolto GiovanniWriting – Original Draft Preparation
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2018-01-01
Abstract
The Conditional Value-at-Risk (CoVaR) has been proposed by [1] to measure the impact of a company in distress on the Value-at-Risk (VaR) of the financial system. We propose here an extension of the CoVaR, that is, the Conditional Quantile-Located VaR (QL-CoVaR), that better deals with tail events, when spillover effects impact the stability of the entire system. In fact, the QL-CoVaR is estimated by assuming that the financial system and the individual companies simultaneously lie in the left tails of their distributions.File in questo prodotto:
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