Systemic risk for financial institutions of major petroleum-based economies: the role of oil

  • This paper examines the relationship between oil movements and systemic risk of financial institution in major petroleum-based economies. We estimate ΔCoVaR for those institutions and observe the presence of elevated increases in its levels corresponding to the subprime and global financial crises. The results provide evidence in favor of risk measurement improvements by accounting for oil returns in the risk functions. The spread between the standard CoVaR and the CoVaR that includes oil absorbs in a time range longer than the duration of the oil shock. This indicates that the drop in the oil price has a longer effect on risk and requires more time to be discounted by the financial institutions. To support the analysis, we consider also the other major market-based systemic risk measures.

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Author:Ahmed A. A. Khalifa, Massimiliano Caporin, Michele CostolaORCiD, Shawkat M. Hammoudeh
Parent Title (English):SAFE working paper series ; No. 172
Series (Serial Number):SAFE working paper series (172)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2017
Year of first Publication:2017
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/06/26
Tag:Financial Institutions; Oil; Petroleum-based Economies; Risk Measurement; Systemic Risk; VaR; ΔCoVaR
Page Number:54
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C2 Single Equation Models; Single Variables / C22 Time-Series Models; Dynamic Quantile Regressions (Updated!)
Licence (German):License LogoDeutsches Urheberrecht