This paper develops an empirical procedure for analyzing the impact of model misspecification and calibration errors on measures of portfolio credit risk. When applied to large simulated portfolios with realistic characteristics, this procedure reveals that violations of key assumptions of the...

Although copula modeling has been applied in a growing number of financial applications, high-dimensional copula modeling is still in its early stages. Vine copula modeling not only has the advantage of extending to higher dimensions easily, but also provides a more flexible measure to capture...

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on institutions being under distress. We define an institution's contribution to systemic risk as the difference between CoVaR conditional on the institution being under distress and the...

This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common volatility in the unforecastable component of a large number of economic indicators. Our estimates display significant independent variations from...

We introduce a new US uncertainty index which is more sensitive to consumer spending and therefore reflects households’ decisions. We find evidence that macroeconomic uncertainty shocks impose negative, statistically significant, and long-lasting effects on consumption, income and financial...