We develop a systemic risk indicator approach using a structural GARCH option-based default risk framework incorporating volatility clustering, variance risk premiums, along with distanceto-capital features. We apply our model to the U.S. banking sector, testing its explanatory and forecasting...

This paper examines interactions between monetary policy and financial stability. There is a general view that central banks smooth interest rate changes to enhance the stability of financial markets. But might this induce a moral hazard problem, and induce financial institutions to maintain...

This paper proposes a contemporaneous smooth transition threshold autoregressive model (C-STAR) as a modification of the smooth transition threshold autoregressive model surveyed in Teräsvirta [1998. Modelling economic relationships with smooth transition regressions. In: Ullah, A., Giles,...