{"slug":"covar","name":"CoVaR and Delta-CoVaR","family":"Systemic risk","status":"active","estimate":"The fitted system tail return conditional on an institution's tail return, and its change from the institution's median-return state.","page":"/systemic","implementation":{"enginePaths":["engine/finweave_engine/layers/systemic/covar.py"],"producerPath":"scripts/build_systemic.py","outputs":["data/parquet/systemic_series.parquet"]},"methodology":[{"path":"engine/finweave_engine/layers/systemic/covar.py","lines":[38,95],"note":"Evaluates the same tail quantile regression at distressed and median institution returns."},{"path":"docs/systemic_methodology.md","lines":[117,153],"note":"Defines the stored measures, rolling window, tail quantile, method label, span, and sign interpretation."},{"path":"docs/systemic_methodology.md","lines":[292,382],"note":"Records historical crisis anchors, independent MES/absorption recomputation, and the validated Delta-CoVaR correction."}],"data":{"vintage":"CoVaR and Delta-CoVaR each contain 38,561 observations for 28 entities from 2021-01-04 through 2026-07-06, measured 2026-08-30","tables":["data/parquet/systemic_series.parquet"],"sources":[{"label":"Yahoo Finance equity returns via the argus collector, internal-use input","url":"https://finance.yahoo.com/"}]},"method":["For each institution, the engine runs a 5% quantile regression of system returns on institution returns over a trailing 252-trading-day window. It evaluates the fitted tail regression when the institution is at its own 5% return quantile to obtain CoVaR.","The corrected engine evaluates that same tail regression at the institution's median return. Delta-CoVaR is the difference between the two conditional tail estimates, following equation 10 in the cited paper.","The 2026-09-05 replacement uses the same-tail baseline, a tighter iterative stopping criterion, and a certified linear-programming fallback for non-convergent fits. The page and analyst reject archived or mixed method generations."],"equations":[{"label":"CoVaR","expr":"covar = params[0] + params[1] * bank_var_q"},{"label":"Median-state CoVaR","expr":"covar_median = params[0] + params[1] * bank_median"},{"label":"Delta-CoVaR","expr":"delta_covar = covar - covar_median"}],"validation":["The parquet contains 38,561 CoVaR observations and 38,561 Delta-CoVaR observations, each covering 28 entities from 2021-01-04 through 2026-07-06.","The corrected generation preserved all row keys and other measures. Independent checks covered 110 windows, including all 54 certified fallback fits and the first/latest observation for every bank, with no failures at the prespecified numerical tolerances."],"limitations":["The historical median-regression baseline was wrong. Its archived generation is retained for audit, while the displayed replacement uses the corrected same-tail definition. Numerical validation does not establish predictive skill.","CoVaR is a conditional return-tail estimate from one market proxy and one institution return series. It is not a failure probability or a causal estimate.","The 252-day rolling window means the series begins only after a full trading-year history is available.","The underlying Yahoo-derived equity-return input carries an internal-use, display-aggregates-only licence posture and is not a redistributable raw dataset."],"references":[{"citation":"Adrian and Brunnermeier, CoVaR, Federal Reserve Bank of New York Staff Report 348, revised September 2014, equation 10.","url":"https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr348.pdf"}],"endpoints":[{"path":"/api/methods/[slug]","example":"/api/methods/covar","method":"GET","returns":"Registry metadata, implementation paths, measured vintage, methodology evidence, validation, and limitations. No model observations or parquet contents."}],"lastVerified":"2026-09-05"}