This paper presents a hybrid model for predicting the occurrence of currency crises by using the artificial intelligence tools. The model combines the learning ability of the artificial neural network (ANN) with the inference mechanism of the empirical mode decomposition (EMD) technique. Thus,...

This paper presents a hybrid model for predicting the occurrence of currency crises by using the artificial intelligence tools. The model combines the learning ability of the artificial neural network (ANN) with the inference mechanism of the empirical mode decomposition (EMD) technique. Thus,...

We show that the profitability of currency carry trades can be understood as the compensation for exchange rate misalignment risk based on the rare disastrous model of exchange rates (Farhi and Gabaix, 2008). It explains over 97% of the cross-sectional excess returns and dominates other...

A survey of the empirical literature on early warning indicators of banking crises is presented. Descriptive analyses have been published for decades, but cross-national panel data analyses have only been performed since the late 1990s. More recently, the severity of the subprime-Lehman crisis...

This research analyzes the relation between investor risk appetite and stock market crises in ISE during the 08.07.1994-04.10.2011 period by utilizing the methodology of Kumar and Persaud (2002). Stock market crises are determined by the CMAX method which identifies the stress days in ISE. The...

Few, if any, of the macro stress tests undertaken before the current crisis uncovered significant vulnerabilities. This article examines the reasons for the poor performance by comparing the outcomes of simple stress tests with actual events for a large sample of historical banking crises. The...

This paper presents a factor-based forecasting model for the financial market vulnerability in the U.S. We estimate latent common factors via the method of the principal components from 170 monthly frequency macroeconomic data to out-of-sample forecast the Cleveland Financial Stress Index. Our...

The oscillators (indicators), capturing the price changes of shares, currencies, indexes and other investment instruments in the short run are emphasized. The main aim is to reveal the capability of the indicators as an adequate instrument to forecast the changes in the market trend of...

We introduce a form of boundedly-rational expectations into a standard asset-pricing model of the exchange rate, where cross-country interest rate differentials are governed by Taylor-type rules. We postulate that agents augment a lagged-information random walk forecast with a term that relates...

This research paper aims to analyse some Early Warning Systems (EWS) for predicting financial crises. The importance of such a study is undeniable in the context of the current and future mix of policies applied by the monetary authority, in which financial stability and price stability play an...