What Are the Most Effective and Vulnerable Firms in Financial Crisis? A Network Representation of Co-Value at Risk in An Emerging Market

In the recent years, different systemic risk measures are developed to analyze the exposure of risk among different financial agents. Due to the potential of network theory in the analysis of the interconnections among non-linear complex systems, in this paper, financial networks are applied to develop different measures of systemic risk. Using the Co-Value at Risk as a well-defined systemic risk measure and 4 different estimation model based on quantile regression, risk spillovers among different firms and along different periods are estimated in Tehran Stock Exchange. Network of systemic risk exposures is represented across time and two indices of vulnerability and systemic importance are introduced to define the most effective and vulnerable firms. The results show that the proposed network-based indices have a good performance to identify the vulnerable and systemically important firms. The results also show that when the market is in the periods of financial downturn/crisis, the network interconnectedness were maximized