EURO 2024 Copenhagen
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3004. Surface Measures of Tail Dependence and Climate Change

Invited abstract in session MC-51: Quantitative methods for systemic and climate risk, stream Risk management in finance.

Monday, 12:30-14:00
Room: M5 (building: 101)

Authors (first author is the speaker)

1. Davide Lauria
Dipartimento di Scienze aziendali, economiche e metodi quantitativi, University of Bergamo

Abstract

Systemic financial risk refers to the situation in which failures or disturbances in one part of the financial system can spread rapidly and extensively, resulting in significant disruptions to the broader economy. Measuring systemic financial risk is a complex task that typically involves various quantitative and qualitative indicators. Examples include the Systemic Risk Index (SRISK), Conditional Value-at-Risk (CoVaR), and Financial Stress Index (FSI). Such measures are closely related to tail dependence measures, which are introduced to quantify the extent of dependence between extreme events of a couple of random variables.
The scope of this research is to provide insight into the possible connection between the risk factors behind climate change and the strength of systemic risk among European companies. To achieve this aim, we first introduce a systemic risk measure based on a recently proposed coefficient of tail dependence which is derived from surface integrals. We then compare the results with existing research. Subsequently, we dynamically relate such measures to the evolution of a set of climate change risk factors.

Keywords

Status: accepted

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