the failure of financial modeling. More specifically, current risk models have failed to properly assess the risks … over prevailing models for evaluating stock market risk exposure during distressed market periods. …

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of financial institutions conditional on other … institutions being in distress. We define an institution's (marginal) contribution to systemic risk as the difference between CoVaR … systemic risk contribution. We argue for macro-prudential regulation based on the degree to which such characteristics forecast …