We propose the realized systemic risk beta as a measure of financial companies’
contribution to systemic risk, given network interdependence between firms’ tail risk exposures.
Conditional on statistically pre-identified network spillover effects and market and
balance sheet information, we define the realized systemic risk beta as the total time-varying
marginal effect of a firm’s Value-at-risk (VaR) on the system’s VaR. Statistical inference
reveals a multitude of relevant risk spillover channels and determines companies’ systemic
importance in the US financial system. Our approach can be used to monitor companies’
systemic importance, enabling transparent macroprudential supervision.
1 Financial Network Systemic Risk Contributions.pdf