Since the 2009 Supervisory Capital Assessment Program (SCAP), US regulators have employed a representative bank model as the benchmark of comparison in mandatory stress test exercises. For risk management functions, a bank's own stress model must be calibrated to reflect the bank's historical...

Conditional value at risk (CoVaR) and marginal expected shortfall (MES) have been proposed as measures of systemic risk. Some argue these statistics should be used to impose a “systemic risk tax” on financial institutions. These recommendations are premature because CoVaR and MES are ad hoc...