Assessing the Systemic Risk Between American and European Financial Systems
Assessing the Systemic Risk Between American and European Financial Systems

Summary/Abstract: The present study focuses on the analysis of systemic risk in the American and Europeanfinancial systems for the period from 20 August 2004 to 28 February 2014. The globalcrisis in 2007 has brought attention to the urgent need to understand the systemic riskissues and the stability of financial systems along with their actors. To assess systemicrisk, Adrian and Brunnermeier (2011) advocated the use of conditional value-at-risk(CoVaR) methodology in integrating quantile regression. Instead of the value-at-risk(VaR), which is unable to detect systemic risk, we seek to use the CoVaR methodologyto calculate the systemic risk levels of the United States and European markets. In the lightof related findings, we conclude that the insurance sector contributes most to the systemicrisk in the USA, while in the Eurozone, it is the financial services sector that is highlyinterconnected with systemic risk.

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