We propose to forecast the Value-at-Risk of bivariate portfolios using copulas which are calibrated on the basis of nonparametric sample estimates of the coefficient of lower tail dependence. We compare our proposed method to a conventional copula-GARCH model where the parameter of a Clayton...

We propose the use of convex combinations of parametric copulas as pair-copulas in high-dimensional vine copula models. By doing so, we circumvent the error-prone need to choose and estimate a parametric copula for each pair-copula in a vine model. We show in simulations that our proposed model...

Abstract In this paper, the optimality of bivariate copula-VaR models and the usefulness of several goodness-of-fit tests for copulas are analysed in a comprehensive empirical study using data for stocks, commodities and FX futures. In particular, I try to answer two questions: (1) which...

Are some insurers relevant for the stability of the financial system? And if yes, what firm fundamentals and aspects of insurers’ business models cause them to destabilize an entire financial sector? We find that several insurers did indeed contribute significantly to the instability of the...

We propose a new set of formal backtests for VaR-forecasts that significantly improve upon existing backtesting procedures. Our new test of unconditional coverage can be used for both one-sided and two-sided testing, which leads to a significantly increased power. Second, we stress the...

We analyze the determinants of the contribution of international banks to both global and local systemic risk during prominent financial crises. We find no empirical evidence supporting conjectures that bank size, leverage, non-interest income or the quality of the bank’s credit portfolio are...

This paper analyzes the systemic risk effects of bank mergers to test the “concentration-fragility” hypothesis. We use the marginal expected shortfall as well as the lower tail dependence between a bank’s stock returns and a relevant bank sector index to capture the merger-related change...