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An Evaluation of Bank VaR Measures for Market Risk During and Before the Financial Crisis

O'Brien, James M. - 2014

We study the performance and behavior of Value at Risk (VaR) measures used by a number of large banks during and before … the financial crisis. Alternative benchmark VaR measures, including GARCH-based measures, are also estimated directly from … the banks' trading revenues and help to explain the bank VaR performance results. While highly conservative in the pre …

Persistent link: https://www.econbiz.de/10013056161

Regular variation of popular GARCH processes allowing for distributional asymmetry

Prono, Todd - 2017 - First version: August 2017

Linear GARCH(1,1) and threshold GARCH(1,1) processes are established as regularly varying, meaning their heavy tails are Pareto like, under conditions that allow the innovations from the, respective, processes to be skewed. Skewness is considered a stylized fact for many financial returns...

Persistent link: https://www.econbiz.de/10011803123

Better the Devil You Know : Improved Forecasts from Imperfect Models

Oh, Dong Hwan; Patton, Andrew J. - 2021

Many important economic decisions are based on a parametric forecasting model that is known to be good but imperfect. We propose methods to improve out-of-sample forecasts from a misspecified model by estimating its parameters using a form of local M estimation (thereby nesting local OLS and...

Persistent link: https://www.econbiz.de/10013321462

The Effects of Volatility on Liquidity in the Treasury Market

Meldrum, Andrew; Sokolinskiy, Oleg - 2023

We study the relationship between volatility and liquidity in the market for on-the-run Treasury securities using a novel framework for quantifying price impact. We show that at times of relatively low volatility, marginal trades that go with the flow of existing trades tend to have a smaller...

Persistent link: https://www.econbiz.de/10014350704

Liquidity Windfalls : The Consequences of Repo Rehypothecation

Infante, Sebastian - 2015

This paper presents a model of repo rehypothecation in which dealers intermediate funds and collateral between cash lenders (e.g., money market funds) and prime brokerage clients (e.g., hedge funds). Dealers take advantage of their position as intermediaries, setting different repo terms with...

Persistent link: https://www.econbiz.de/10013023815

The Real Effects of Credit Line Drawdowns

Berrospide, Jose M. - 2015

Do firms use credit line drawdowns to finance investment? Using a unique dataset of 467 COMPUSTAT firms with credit lines, we study the purpose of drawdowns during the 2007-2009 financial crisis. Our data show that credit line drawdowns had already increased in 2007, precisely when disruptions...

Persistent link: https://www.econbiz.de/10013027918

Endogenous Debt Maturity and Rollover Risk

Brancati, Emanuele - 2016

We challenge the common view that short-term debt, by having to be rolled over continuously, is a risk factor that exposes banks to higher default risk. First, we show that the average effect of expiring obligations on default risk is insignificant; it is only when a bank has limited access to...

Persistent link: https://www.econbiz.de/10013210450

Firm Networks and Asset Returns

Ramírez, Carlos A. - 2020

This paper argues that changes in the propagation of idiosyncratic shocks along firm networks are important to understanding variations in asset returns. When calibrated to match key features of supplier-customer networks in the United States, an equilibrium model in which investors have...

Persistent link: https://www.econbiz.de/10012854635

Closed-Form Estimation of Finite-Order Arch Models : Asymptotic Theory and Finite-Sample Performance

Prono, Todd - 2017

Strong consistency and weak distributional convergence to highly non-Gaussian limits are established for closed-form, two stage least squares (TSLS) estimators for a class of ARCH(p) models. Conditions for these results include (relatively) mild moment existence criteria that are supported...

Persistent link: https://www.econbiz.de/10012967740

High-Dimensional Copula-Based Distributions with Mixed Frequency Data

Oh, Dong Hwan; Patton, Andrew J. - 2021

This paper proposes a new model for high-dimensional distributions of asset returns that utilizes mixed frequency data and copulas. The dependence between returns is decomposed into linear and nonlinear components, enabling the use of high frequency data to accurately forecast linear dependence,...

Persistent link: https://www.econbiz.de/10013221496