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Market- and Book-Based Models of Probability of Default for Developing Macroprudential Policy Tools

Jin, Xisong; Simone, Francisco Nadal de - Central Bank of Luxembourg - 2011

The recent financial crisis raised awareness of the need for a framework for conducting macroprudential policy. Identifying as early as possible and addressing the buildup of endogenous imbalances, exogenous shocks, and contagion from financial markets, market infrastructures, and financial...

Persistent link: https://www.econbiz.de/10009324235

Analytic Moments for GARCH Processes

Alexander, Carol; Lazar, Emese; Stanescu, Silvia - Henley Business School, University of Reading - 2010

Conditional returns distributions generated by a GARCH process, which are important for many problems in market risk … moments of GARCH returns distributions in several ways: we consider a general GARCH model – the GJR specification with a … specific GARCH models largely used in practice are recovered as special cases; we derive the limits of these moments as the …

Persistent link: https://www.econbiz.de/10010838036

Endogenizing Model Risk to Quantile Estimates

Alexander, Carol; Sarabia, Jose Maria - Henley Business School, University of Reading - 2010

We quantify and endogenize the model risk associated with quantile estimates using a maximum entropy distribution (MED) as benchmark. Moment-based MEDs cannot have heavy tails, however generalized beta generated distributions have attractive properties for popular applications of quantiles....

Persistent link: https://www.econbiz.de/10010838057

Banking Systemic Vulnerabilities: A Tail-risk Dynamic CIMDO Approach

Jin, Xisong; Simone, Francisco Nadal De - Central Bank of Luxembourg - 2013

This study proposes a novel framework which combines marginal probabilities of default estimated from a structural credit risk model with the consistent information multivariate density optimization (CIMDO) methodology of Segoviano, and the generalized dynamic factor model (GDFM) supplemented by...

Persistent link: https://www.econbiz.de/10010631759

An Early-warning and Dynamic Forecasting Framework of Default Probabilities for the Macroprudential Policy Indicators Arsenal

Jin, Xisong; Simone, Francisco Nadal De - Central Bank of Luxembourg - 2012

The estimation of banks? marginal probabilities of default using structural credit risk models can be enriched incorporating macro-financial variables readily available to economic agents. By combining Delianedis and Geske?s model with a Generalized Dynamic Factor Model into a dynamic t-copula...

Persistent link: https://www.econbiz.de/10010826820