This paper develops a two-step estimation methodology, which allows us to apply catastrophe theory to stock market … returns with time-varying volatility and model stock market crashes. Utilizing high frequency data, we estimate the daily … realized volatility from the returns in the first step and use stochastic cusp catastrophe on data normalized by the estimated …

increase volatility in order to exploit the implicit protection. However, if they increase volatility too much they may induce … that it allows high volatility choices, while net worth is high. However, risk limits tighten abruptly when the firm's net …

This paper proposes Spillover Persistence as a measure for financial fragility. The volatility paradox predicts that … fragility builds up when volatility is low, which challenges existing measures. Spillover Persistence tackles this challenge by …. Variation in financial constraints connects Spillover Persistence to fragility. The results are consistent with the volatility …

framework is a bivariate volatility model, where volatility spillovers of either positive or negative sign are allowed for. Our … countries. Regarding the volatility spillovers, such spillovers from bond returns to those of stocks are stronger than the other … results show that by considering time-varying return and volatility spillovers when calculating the risk-minimising portfolio …