In this paper we 'update' the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second, it is...

The present work deals with a frequently detected failure of the uncovered interest rate parity (UIP) - the absence of bivariate cointegration between domestic and foreign interest rates. We explain non-stationarity of the interest differential via central bank reactions to exchange rate...

The present work deals with a frequently detected failure of the uncovered interest rate parity (UIP) - the absence of bivariate cointegration between domestic and foreign interest rates. We explain non-stationarity of the interest differential via central bank reactions to exchange rate...

We introduce a novel simulation-based network approach, which provides full-fledged distributions of potential interbank losses. Based on those distributions we propose measures for (i) systemic importance of single banks, (ii) vulnerability of single banks, and (iii) vulnerability of the whole...

In this paper we study the impact of model uncertainty, which occurs when linking a stress scenario to default probabilities, on reduced-form credit risk stress testing. This type of uncertainty is omnipresent in most macroeconomic stress testing applications due to short time series for banks'...

We apply Bayesian Model Averaging and a frequentistic model space analysis to assess the pricing-determinants of credit default swaps (CDS). Our study focuses on the complete model space of plausible models covering most of the variables and specifications used elsewhere in the literature,...

We apply Bayesian Model Averaging and a frequentistic model space analysis to assess the pricing determinants of credit default swaps (CDS). Our study focuses on the complete model space of plausible models and thus supports ultimate robustness. Using a large dataset of CDS contracts we find...