Systemic Risk Measuring in Tehran Stock Exchange with CoVaR and MES Approaches

Systemic risk expresses the breaking down possibility of a financial system in the time of distress. In many cases, investors are concerned to loss the value of a stock or a commodity, whereas in systemic risk the focus is on the whole market. This falling down commonly occurs when the value of a leading company starts to drop in an existing system. The fear of bankruptcy will be spread out in a wavelike motion and will had a negative effect on other companies, thus they will decline quickly. These chain reactions cause market to encounter stress and fall into crisis. Generally, systemic risk measures are categorized into two classes; the first class is related to the risk of the financial system when a key company suffers economic distress, and the second class is associated with a company risk while a financial system is in distress. In this respect, a number of measures have been defined by researchers and market participants to assess financial system risk.Using twenty companies in Tehran Stock Exchange (TSE), this paper evaluates systemic risk of the sample market with CoVaR and MES approaches.