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We show that including distribution costs into a general equilibrium model of international portfolio choice contributes to explaining the “home bias” in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even...
Persistent link: https://www.econbiz.de/10008779855
Theory of financial intermediation gives contradicting answers to the question whether banks should diversify or focus their loan portfolios. Our aim is to find out which of the two strategies is predominant in the German banking market. To this end we measure diversification for all German...
Persistent link: https://www.econbiz.de/10002946577
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Persistent link: https://www.econbiz.de/10002133168
This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three...
Persistent link: https://www.econbiz.de/10003964379
Over the term of a securitization transaction, the concept of non-compliance allows a securitizing bank to classify a securitized loan as materially non-compliant with certain transaction requirements. Such a loan becomes unqualified for loss allocation. Therefore, non-compliant loans can...
Persistent link: https://www.econbiz.de/10008653392
"Arbitrage CDOs" have recorded an explosive growth during the years before the outbreak of the financial crisis. In the present paper we discuss potential sources of such arbitrage opportunities, in particular arbitrage gains due to mispricing. For this purpose we examine the risk profiles of...
Persistent link: https://www.econbiz.de/10003891104
I introduce a novel, hierarchical model of tail dependent asset returns which can be particularly useful for measuring portfolio credit risk within the structural framework. To allow for a stronger dependence within sub-portfolios than between them, I utilise the concept of nested Archimedean...
Persistent link: https://www.econbiz.de/10009373402
This study provides a rigorous empirical comparison of structural and reduced-form credit risk frameworks. As major difference we focus on the discriminative modeling of default time. In contrast to previous literature, we calibrate both approaches to bond and equity prices. By using same input...
Persistent link: https://www.econbiz.de/10009010090
We put forward a Merton-type multi-factor portfolio model for assessing banks’ contributions to systemic risk. This model accounts for the major drivers of banks’ systemic relevance: size, default risk and correlation of banks’ assets as a proxy for interconnectedness. We measure systemic...
Persistent link: https://www.econbiz.de/10009011220