This study investigates the dynamics of systemic risk between the Tehran Stock Exchange (TSE) and its core financial sectors from 2011 to 2025. By employing a Copula-DCC-EGARCH framework, we estimate the conditional correlations between the TSE and six major financial sectors, including investment, real estate, banking, insurance/pension, and financial intermediation. To quantify systemic risk spillovers, we utilize the Student’s t-copula to compute CoVaR and ΔCoVaR metrics.

The empirical findings reveal significant positive conditional correlations between most financial sectors and the TSE adjusted index, alongside heterogeneous risk spillover patterns. Specifically, the investments, real estate, banking, and insurance/pension sectors emerge as primary sources of systemic risk transmission to the broader market and other financial segments. Furthermore, the analysis of the TSE adjusted index’s CoVaR dynamics indicates a sharp decline during periods of extreme market stress, signaling a substantial amplification of tail risk.

These results provide critical insights into the structure of risk interconnectedness within the Iranian financial system. By mapping the primary channels of risk transmission, this study offers significant policy implications for macro-prudential regulators, financial supervisors, and investment managers in designing effective hedging strategies and systemic risk management frameworks under conditions of economic uncertainty.