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Chronicle of a death foretold : does higher volatility anticipate corporate default?
Ampudia, Miguel; Busetto, Filippo; Fornari, Fabio - 2023
We test whether a simple measure of corporate insolvency based on equity return volatility – and denoted as Distance to Insolvency (DI) – delivers better predictions of corporate default than the widely-used Expected Default Frequency (EDF) measure computed by Moody’s. We look at the...
Persistent link: https://www.econbiz.de/10014258129
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Systematic Tail Risk
Harris, Richard D. F. - 2016
We propose new systematic tail risk measures constructed using two different approaches. The first extends the canonical downside beta and co-moment measures, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated...
Persistent link: https://www.econbiz.de/10012977194
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Filtered Historical Simulation Value-at-Risk Models and Their Competitors
Gurrola-Perez, Pedro - 2015
portfolios of financial instruments. This quest led institutions to develop Value-at-Risk (VaR) models for their trading … portfolios in the 1990s. Subsequently, so-called filtered historical simulation VaR models have become popular tools due to their … estimates are often superior to the unconditional ones produced by the first generation of VaR models. This paper explores the …
Persistent link: https://www.econbiz.de/10013026905
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Credit Growth, the Yield Curve and Financial Crisis Prediction : Evidence from a Machine Learning Approach
Bluwstein, Kristina - 2020
We develop early warning models for financial crisis prediction using machine learning techniques on macrofinancial data for 17 countries over 1870–2016. Machine learning models mostly outperform logistic regression in out-of-sample predictions and forecasting. We identify economic drivers of...
Persistent link: https://www.econbiz.de/10012843879
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Macroeconomic Tail Events with Non-Linear Bayesian VARs
Chiu, Ching-Wai (Jeremy) - 2016
types of regime switching models: threshold VAR and Markov switching VAR. For each of the models, we estimate regimes which …-of-sample forecasting exercises, and find that the threshold VAR model has the potential to predict tail events in conditional forecasting …
Persistent link: https://www.econbiz.de/10012984718
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News and Narratives in Financial Systems : Exploiting Big Data for Systemic Risk Assessment
Nyman, Rickard - 2018
This paper applies algorithmic analysis to large amounts of financial market text-based data to assess how narratives and sentiment play a role in driving developments in the financial system. We find that changes in the emotional content in market narratives are highly correlated across data...
Persistent link: https://www.econbiz.de/10012925779
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News and Narratives in Financial Systems : Exploiting Big Data for Systemic Risk Assessment
Nyman, Rickard - 2018
This paper applies algorithmic analysis to large amounts of financial market text-based data to assess how narratives and sentiment play a role in driving developments in the financial system. We find that changes in the emotional content in market narratives are highly correlated across data...
Persistent link: https://www.econbiz.de/10012930755
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Liquidity Risk, Cash-Flow Constraints and Systemic Feedbacks
Kapadia, Sujit - 2012
The endogenous evolution of liquidity risk is a key driver of financial crises. This paper models liquidity feedbacks in a quantitative model of systemic risk. The model incorporates a number of channels important in the current financial crisis. As banks lose access to longer-term funding...
Persistent link: https://www.econbiz.de/10013104540
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Risk-taking and Uncertainty : Do Contingent Convertible (CoCo) Bonds Increase the Risk Appetite of Banks?
Fatouh, Mahmoud; Neamțu, Ioana; van Wijnbergen, Sweder - 2021
We assess the impact of contingent convertible (CoCo) bonds and the wealth transfers they imply conditional on conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk-taking incentives by issuing CoCo bonds, when...
Persistent link: https://www.econbiz.de/10013212056
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Capital Over the Business Cycle : Renting Versus Ownership
Gal, Peter N. - 2013
We find that capital renting makes up one fifth of US capital expenditures, and it increases during downturns. Further, we present cross-country evidence that output losses after financial crises are smaller where renting is more prevalent. To understand these findings, we build a general...
Persistent link: https://www.econbiz.de/10013077502