Studies from Institut Teknologi Bandung Yield New Data on Risk Management (Formulating MCoVaR to Quantify Joint Transmissions of Systemic Risk across Crypto and Non-Crypto Markets: A Multivariate Copula Approach): Insurance – Risk Management

2023 MAR 15 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx COVID-19 Daily -- Fresh data on risk management are presented in a new report. According to news reporting out of Bandung, Indonesia, by NewsRx editors, research stated, “Evidence that cryptocurrencies exhibit speculative bubble behavior is well documented.”

Financial supporters for this research include Institut Teknologi Bandung (Itb)/kemendikbudristek, Indonesia.

The news correspondents obtained a quote from the research from Institut Teknologi Bandung: “This evidence could trigger global financial instability leading to systemic risk. It is therefore crucial to quantify systemic risk and investigate its transmission mechanism across crypto markets and other global financial markets. We can accomplish this using the so-called multivariate conditional value-at-risk (MCoVaR), which measures the tail risk of a targeted asset from each market conditional on a set of multiple assets being jointly in distress and on a set of the remaining assets being jointly in their median states. In this paper, we aimed to find its analytic formulas by considering multivariate copulas, which allow for the separation of margins and dependence structures in modeling the returns of the aforementioned assets. Compared to multivariate normal and Student’s * * t* * benchmark models and a multivariate Johnson’s SU model, the copula-based models with non-normal margins produced a MCoVaR forecast with superior conditional coverage and backtesting performances.”

According to the news reporters, the research concluded: “Using a corresponding Delta MCoVaR, we found the crypto assets to be potential sources of systemic risk jointly transmitted within the crypto markets and towards the S&P 500, oil, and gold, which was more apparent during the COVID-19 period encompassing the recent 2021 crypto bubble event.”

For more information on this research see: Formulating MCoVaR to Quantify Joint Transmissions of Systemic Risk across Crypto and Non-Crypto Markets: A Multivariate Copula Approach. Risks, 2023,11(35):35. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks11020035.

Our news editors report that more information may be obtained by contacting Arief Hakim, Faculty of Mathematics and Natural Sciences, Institut Teknologi Bandung, Bandung 40132, Indonesia. Additional authors for this research include Khreshna Syuhada.

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