In this study we develop an early warning system (EWS) to forecast currency crises in emerging countries in Asia and Latin America, using logit regression on monthly data from 1992 to 2011. We found that macroeconomic and institutional variables are valuable indicators for forecasting crises....

This study aims to compare the prediction accuracy of traditional distress prediction models for the firms which are at an early and advanced stage of distress in an emerging market, Pakistan, during 2001-2015. Design/methodology/approach: The methodology involves constructing model scores for...

We consider a risk-aware multi-armed bandit framework with the goal of avoiding catastrophic risk. Such a framework has multiple applications in financial risk management. We introduce a new conditional value-at-risk (CVaR) estimation procedure combining extreme value theory with automated...

The cryptocurrency market offers significant investment opportunities but also entails higher risks as compared to other asset classes. This article aims to analyse the financial risk characteristics of individual cryptocurrencies and of a broad cryptocurrency market portfolio. We construct a...

Volatility clustering and fat tails are prominently observed in financial markets. Here, we analyze the underlying mechanisms of three agent-based models explaining these stylized facts in terms of market instabilities and compare them on empirical grounds. To this end, we first develop a...

It is generally argued that Islamic banks are safer than conventional banks. The prime reason is that their product structure is essentially asset-backed financing, while conventional banks rely heavily on leveraging, which was considered one of the main causes of the 2008 global financial...

Currency crises are a significant feature of the present-day world economy, in which financial transactions are many times larger than monetary flows in the "real economy", so that defending a currency's exchange-rate is a major challenge for the governments of countries which may be smaller...

In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause...

We propose a novel approach that combines random forests and the wavelet transform to model the prediction of currency crises. Our classification model of random forests, built using both standard predictors and wavelet predictors, and obtained from the wavelet transform, achieves a demonstrably...