Systemic Risk and Measures of Risk Spill-Over in the Financial System – The Case of Poland

The recent global financial crisis has emphasized the importance of connectedness as a key dimension of systemic risk. Systemic risk is involved in the financial system, a collection of interconnected institutions that have mutual relationships through which losses can quickly propagate in periods of financial distress. In this paper delta CoVaR and the principal components analysis (econometric method to capture this connectedness) are applied to evaluate systemic risk in the financial system. The authors use the principal components analysis to estimate the number and importance of common factors the rates of return of selected companies in the financial sector (not only banks). The empirical study was conducted in the period from November 2004 until November 2018 with the purpose to investigate risk spill-over in the Polish financial system.