Identification of Model Risk of Selected Systemic Risk Measures for The Polish Banking Industry
Katarzyna Kuziak , Krzysztof Piontek
AbstractThere are many approaches to measure systemic risk (Hansen 2013), but the main distinction entails financial soundness indicators and advanced systemic risk models. The advanced models are based on the statistical multivariate distributions or on the stochastic processes. In the paper the Conditional Value-at-Risk (CoVaR) proposed by Adrian and Brunnermeier (2011, 2016) will be used to assess systemic risk. Two methods, i.e. the conditional (DCC-GARCH) and unconditional (quantile regression) will be applied for these estimations. As a proxy of a financial system a construction of an index, free from disadvantages as opposed to the stock market index, will be proposed by the author. The empirical analysis for the Polish financial system will contain: a model risk analysis, comparison of results for selected measure of systemic risk and estimation methods, an evaluation of results (back testing and a financial condition assessment of financial institutions). In the study existence of the strong and positive relationship between results of the delta CoVaR gained while applying the DCCGARCH and quantile regression confirmed complementarity of both approaches. The relationship between the systemic risk measure for an individual bank and measure of its financial condition was confirmed, but the results were not consistent. The delta CoVaR was more influenced by the size of a bank rather than its financial condition. This study indicated that the delta CoVaR and a composite indicator contained different sets of information.
|Publication size in sheets||0.5|
|Book||Soliman Khalid S. (eds.): Education Excellence and Innovation Management: A 2025 Vision to Sustain Economic Development during Global Challenges, 2020, International Business Information Management Association (IBIMA), ISBN 9780999855141|
|Keywords in English||Systemic risk, banking industry, CoVaR, model risk|
|Uwaga||The project is financed by Ministry of Science and Higher Education in Poland under the programme “Regional Initiative of Excellence” 2019-2022 project number 015/RID/2018/19 total funding amount 10 721 040, 00 PLN.|
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