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The questionable benefits of mutual clearing agreements for derivatives

Tywoniuk, Magdalena - 2020

Recently, for standard asset classes, the first mutual clearing agreements between Central Coun- terparties (CCPs) have come into existence. There are already global concerns over the unique threats and benefits which arise from these situations, and further concern for an extension of agree-...

Persistent link: https://www.econbiz.de/10012271216

The impact of treasury supply on financial sector lending and stability

Krishnamurthy, Arvind; Vissing-Jørgensen, Annette - 2015

We present a theory in which the key driver of short-term debt issued by the financial sector is the portfolio demand for safe and liquid assets by the nonfinancial sector. This demand drives a premium on safe and liquid assets that the financial sector exploits by owning risky and illiquid...

Persistent link: https://www.econbiz.de/10011412482

How market intervention can prevent bubbles and crashes

Westphal, Rebecca; Sornette, Didier - 2020

Using an agent-based model (ABM) with fundamentalists and chartists, prone to develop bubbles and crashes, we demonstrate the usefulness of direct market intervention by a policy maker, documenting strong performance in preventing bubbles and drawdowns and augmenting significantly the welfare of...

Persistent link: https://www.econbiz.de/10012271219

Sentiment Spin : Attacking Financial Sentiment with GPT-3

Leippold, Markus - 2023

The use of dictionaries in financial sentiment analysis and other financial and economic applications remains widespread because keyword-based methods appear more transparent and explainable than more advanced techniques commonly used in computer science. However, this paper demonstrates the...

Persistent link: https://www.econbiz.de/10014257700

Patience is a virtue - in value investing

Hens, Thorsten; Schenk-Hoppé, Klaus Reiner - 2018

This note illustrates a simple but important insight for financial investment. In a heterogeneous agent-based evolutionary finance market model with long-lived assets, markets are stable if clients of fundamental ('value') investment funds are more patient than clients of other funds

Persistent link: https://www.econbiz.de/10011899600

Financial intermediation, capital accumulation and crisis recovery

Gersbach, Hans; Rochet, Jean-Charles; Scheffel, Martin - 2019 - This Version: December 2019

We integrate bank and bond financing into a two-sector neoclassical growth model to examine the stabilization effect of … endogenous bank leverage adjustment. We show that although bank leverage amplifies shocks, the increase of leverage to a decline … in bank equity is an automatic stabilizer in downturns, since it partially offsets the decline of bank lending to …

Persistent link: https://www.econbiz.de/10012134794

Some borrowers are more equal than others : bank funding shocks and credit reallocation

De Jonghe, Olivier; Dewachter, Hans; Mulier, Klaas; … - 2019

bank- rm level credit data, we show that banks reallocate credit within their domestic loan portfolio in at least three …

Persistent link: https://www.econbiz.de/10012101160

Aggregate investment externalities and macroprudential regulation

Gersbach, Hans; Rochet, Jean-Charles - 2012

Evidence suggests that banks tend to lend a lot during booms, and very little during recessions. We propose a simple explanation for this phenomenon. We show that, instead of dampening productivity shocks, the banking sector tends to exacerbate them, leading to excessive fluctuations of credit,...

Persistent link: https://www.econbiz.de/10009558435

The price of the smile and variance risk premia

Gruber, Peter H.; Tebaldi, Claudio; Trojani, Fabio - 2015 - This version: September 8, 2015

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

Persistent link: https://www.econbiz.de/10011412294

A simple mechanism for financial bubbles : time-varying momentum horizon

Lin, Li; Sornette, Didier - 2016

Building on the notion that bubbles are transient self-fulfilling prophecies created by positive feedback mechanisms, we construct the simplest continuous price process whose expected returns and volatility are functions of momentum only. The momentum itself is measured by a simple continuous...

Persistent link: https://www.econbiz.de/10011619422