The Basel credit-to-GDP gap is the single most popular measure of excessive credit growth and the financial cycle in general. It is based, however, on a purely statistical understanding of excessiveness: Growth is excessive if the credit-to-GDP ratio (i.e. the ratio of credit to nominal GDP) is...

The severity function approach (abbreviated SFA) is a method of selecting adverse scenarios from a multivariate density. It requires the scenario user (e.g. an agency that runs banking sector stress tests) to specify a "severity function", which maps candidate scenarios into a scalar severity...

CDS spreads are often used as market's view of credit risk. There is no popular alternative to it; perhaps only the distance-to-default measure based on Merton (1974) comes close to it. In this paper we investigate the relationship between these two measures for large European banks in post...

When firms trade forward contracts with banks to protect foreign currency cash flows against exchange rate movements, foreign exchange risk migrates to the banking sector. We show how this migrated risk may induce systemic repercussions with severe implications for the real economy. For...

Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period....

We explore whether modelling parameter time variation improves the point, interval and density forecasts of nine major exchange rates vis-a-vis the US dollar over the period 1976-2015. We find that modelling parameter time variation is needed for an accurate calibration of forecast confidence...

This paper contributes to the literature by identifying the response patterns of direct and indirect real estate returns to shocks in the market fundamentals. The response speeds are estimated with vector autoregressive models using TBI and NAREIT returns for the period 1994-2009 in the United...

This paper investigates to what extent Chinese monetary policy is constrained by the dollar peg. To this end, we use a cointegration framework to examine whether Chinese interest rates are driven by the Fed's policy. In a second step, we estimate a monetary model for China, in which we include...

We address the question of whether various types of speculative investor correctly anticipate future USD/EUR currency movements or whether they tend rather to react to past exchange rate movements. Throughout the analysis, we differentiate between large and small traders, and an upper bound of...

We study the synchronization of credit booms and busts among 12 major European economies and the United States between 1972-2011. We propose a regression-based procedure to test whether boom-bust phases of credit cycles coincide across countries and to cluster countries with positively...