We propose a dynamic semi-parametric framework to study time variation in tail parameters. The framework builds on the Generalized Pareto Distribution (GPD) for modeling peaks over thresholds as in Extreme Value Theory, but casts the model in a conditional framework to allow for time-variation...

Market participants use leveraged derivatives to gain access to equity market exposure through broker banks. Leverage and interconnectedness via overlapping portfolios of dealer banks can amplify adverse market movements, potentially causing sizeable losses. I propose a model, based on granular...

Using extreme value theory tools, we demonstrate that the distributions of the exchange market pressure (EMP) series for most of twelve emerging Europe countries have heavy tails, and disregarding their tail properties may lead to substantial underestimation of the probability of tail events....

This paper proposes methods for estimation and inference in multivariate, multi-quantile models. The theory can simultaneously accommodate models with multiple random variables, multiple confidence levels, and multiple lags of the associated quantiles. The proposed framework can be conveniently...

The present paper focuses on three questions: (i) Are heavy tails a relevant feature of the distribution of BUND futures returns? (ii) Is the tail behaviour constant over time? (iii) If it is not, can we use the tail index as an indicator for financial market risk and does it add value in...

This paper estimates a time-varying AR-GARCH model of inflation producing measures of inflation uncertainty for the euro area, and investigates their linkages in a VAR framework, also allowing for the possible impact of the policy regime change associated with the start of EMU in 1999. The main...

We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. The information contained in large datasets is captured by few dynamic common factors, which we assume being conditionally heteroskedastic. After presenting the model, we propose a...

While up to the late 1990s Japanese foreign exchange intervention was fully sterilized, Japanese monetary authorities left foreign exchange intervention unsterilized when Japan entered the liquidity trap in 1999. According to previous research on foreign exchange intervention, unsterilized...

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The...

Banks typically determine their capital levels by separately analysing credit and interest rate risk, but the interaction between the two is significant and potentially complex. We develop an integrated economic capital model for a banking book where all exposures are held to maturity. Our...