CoVaR (Conditional Value at Risk)

CoVaR, or Conditional Value at Risk, measures the risk of a financial market or asset, given that another related market or asset is experiencing stress or a significant downturn. It helps identify how one part of the financial system might be affected when another part is under extreme pressure. Essentially, CoVaR shows the potential impact on a portfolio or market during extreme events, considering the interconnected nature of financial systems, and is used to assess systemic risk beyond individual assets.