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We integrate liquidity risk measured by the weighted spread into a Value-at-Risk (VaR) framework. The weighted spread measure extracts liquidity costs by order size from the limit order book. We show that it is precise from a risk perspective in a wide range of clearly defined situations. Using...
Persistent link: https://www.econbiz.de/10010305731
Market liquidity is the ease of trading an asset. Its risk is the potential loss, because a security can only be traded at high or prohibitive costs. While the omnipresence and importance of market liquidity is widely acknowledged, it has long remained a more or less elusive concept. Treatment...
Persistent link: https://www.econbiz.de/10010305705
Market liquidity risk, the difficulty or cost of trading assets in crises, has been recognized as an important factor in risk management. Literature has already proposed several models to include liquidity risk in the standard Value-at-Risk framework. While theoretical comparisons between those...
Persistent link: https://www.econbiz.de/10010305708
We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate and a representative...
Persistent link: https://www.econbiz.de/10010305709
We investigate if the benchmark transition from London Interbank Offered Rate (Libor) to Secured Overnight Financing Rate (SOFR) affects the costs of borrowing floating rate debt. The primary market for dollar-denominated floating rate notes (FRNs) provides an ideal laboratory to study these e...
Persistent link: https://www.econbiz.de/10014551704
In this paper, we look into the so-called "revolving door of Washington", which is the movement of individuals between federal government positions and jobs in the private sector, and examine its link to long-run stock returns. We find that firms where current public officials become future...
Persistent link: https://www.econbiz.de/10011440132
The Chinese government implemented the Qualified Foreign Institutional Investor (QFII) system in order to advance the quality of local capital markets by participation of foreign institutional investors. This paper identifies the channels through which foreign institutional investors influence...
Persistent link: https://www.econbiz.de/10013208639
We incorporate regime switching between monetary and fiscal policies in a general equilibrium model to explain three stylized facts: (1) the positive stock-bond return correlation from 1971 to 2000 and the negative one after 2000, (2) the negative correlation between consumption and inflation...
Persistent link: https://www.econbiz.de/10012653485
We argue that the planned transition toward alternative benchmark rates gives reason to mourn Libor. Guided by a model in which banks and non-banks can lend to each other, subject to realistic regulatory constraints, we show empirically that tighter financial regulation increases interbank rates...
Persistent link: https://www.econbiz.de/10012661545
stylised facts of asset returns like fat tails and clustered volatility. Introducing regulatory measures shows that only a … mandatory risk limit is beneficial from every perspective, while a short selling ban – though reducing volatility – increases … tail risk. The contrary holds true for a Tobin Tax: it reduces the occurrence of crashes but increases volatility …
Persistent link: https://www.econbiz.de/10013370091