This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial...

We study the risk of holding credit default swaps (CDS) in the trading book. In particular, we compare the Value at Risk (VaR) of a CDS position to the VaR for investing in the respective firm's equity. Our sample consists of CDS – stock price pairs for 86 actively traded firms over the period...

We investigate the risk of holding credit default swaps(CDS) in the trading book and compare the Value at Risk (VaR) of a CDS position to the VaR for investing in the respective firm’s equity using a sample of CDS – stock price pairs for 86 actively traded firms over the period from March...

This paper tests whether the results from standard structure-conduct-performance [SCP] models estimated at the industry level are sensitive to the degree of heterogeneity of the firms in the industries. Industries are separated into homogeneous and heterogeneous categories depending on whether...

Density forecasts have become quite important in economics and finance. For example, such forecasts play a central role in modern financial risk management techniques like Value at Risk. This paper suggests a regression based density forecast evaluation framework as a simple alternative to other...

Volatility of financial returns as a measure of risk is a key parameter in asset pricing and risk management and holding periods for financial instruments of several weeks or month are common. Nevertheless, little is known about the predictability of return volatility at longer horizons. This...

We estimate the effects of stock market volatility on the growth rates of durable consumption, non-durable consumption and invest- ment using post-war US data. Our results indicate that high levels of stock market volatility exert large adverse effects on the growth rates of investment and...

We study the development of bank lending in the U.S. after four large jumps in uncertainty using an event study approach. We find that more liquid banks reduce lending less than banks with smaller liquidity ratios after a surge in uncertainty. Lending by smaller banks is also less responsive to...

Indicators of latent variables are usually assumed to be driven by the latent variable and some random noise. Background indicators are in contrast also systematically driven by variables outside the structural model of interest. This paper assesses instrumental variable estimates of effects of...

Multipliers estimated for sixteen major economies predict that 1% more economic policy uncertainty (EPU) produces about 0.3% - 0.8% more sovereign CDS volatility. The impact of EPU is strong but short-lived. US EPU is an important additional source of CDS volatility for European countries,...