dynamic conditional correlation

The present study presents the revised systemic risk model with the Changing conditional value-at-risk (∆CoVaR) approach in banking network with an emphasis on bank indicators. Systemic risk investigates the potential capacity of financial crisis spread among banks and ultimately the real sector of the economy through simultaneously increasing the fat tail of loss distribution. This is a descriptive-analytical research in terms of method and a developmental/applicative study in terms of purpose. The research time zone is 2009/03/21-2021/01/19. The research data includes the weekly average stock price of seven banks (Mellat, Tejarat, Saderat, EN Bank, Parsian, Karafarin, and Sina) listed in stock exchange and the weekly average of the general stock market index from Rahavardnovin system, and data related to the banks’ financial metrics are extracted from the financial statements of the banks in the Codal website.To measure each bank’s share in systemic risk, the measure (∆COVaR) is employed. We show the better fit of ∆CoVaR for measuring risk compared to VaR and CoVaR models. The ratings of the investigated banks are tested by means of two criteria (RMSE) and (MAE) and it is concluded that in some banks, the crisis has higher destructive effects on the entire financial system than that in other banks. Finally, the association between systemic risk and the financial parameters of the investigated banks is reviewed and it is concluded that the improvement of the capital adequacy ratio (CAR) has an inverse and significant relationship with systemic risk.

This paper investigates the conditional correlations and volatility spillovers between the dollar exchange rate return, gold coin return and crude oil return to stock index return. Monthly returns in the 144 observations (2005 - 2017) are analyzed by constant conditional correlation, dynamic conditional correlation, VARMA-GARCH and VARMA-AGARCH models. So this paper presents interdependences in conditional volatilities across returns in each market. The purpose of this study is to identifying volatility spillover on the capital market in order to managing financial volatility, in addition to policy making and risk management. The evidence of this study confirms the asymmetric volatility spillovers of the dollar exchange return and also conditional shocks from gold coin and crude oil returns to the stock index that ignoring the asymmetries effects in in the model will exaggerate the returns and shocks spillover. In addition to these results, dynamic model gives the statistically significant estimates for all returns with most impact shocks from dollar exchange return and gold coin returns.