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Assessing systemic fragility : a probabilistic perspective
Radev, Deyan - 2014
We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic fragility indicators for euro area banks and sovereigns, based on CDS...
Persistent link: https://www.econbiz.de/10010419854
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The information content in contingent convertible bond prices
Grinderslev, Oliver Juhler; Kristiansen, Kristian Loft - 2017
Credit institutions are to an increasing extent using Contingent Convertible Bonds (CoCos) to meet part of their capital requirements, which could suggest that the market for CoCos contains useful information on the robustness of the issuer. This paper gives a thorough introduction to CoCos -...
Persistent link: https://www.econbiz.de/10011761303
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The determinants of CDS spreads : evidence from the model space
Pelster, Matthias; Vilsmeier, Johannes - 2016
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,...
Persistent link: https://www.econbiz.de/10011561899
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Credit risk stress testing and copulas : is the Gaussian copula better than its reputation?
Koziol, Philipp; Schell, Carmen; Eckhardt, Michael - 2015
), CreditMetrics, KMV) still rely on Gaussian copulas. This paper complements the finance literature providing new insights into the … impact of different copulas in stress test applications using supervisory data of 17 large German banks. Our findings imply … high stress effects under extreme scenarios. Heavy-tailed copulas like the Clayton or the t copula are recommended in the …
Persistent link: https://www.econbiz.de/10011419593
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A new approach to modelling banks' equity volatility : adding time-to-maturity jumps
Grinderslev, Oliver Juhler; Kristiansen, Kristian Loft - 2017
We add discrete jumps in the time-to-maturity of a firm's debt to the model of Engle and Siriwardane (2015), such that changes in equity volatility can be explained by the volatility of the firm's assets, its market leverage and investors' perception of the time-to-maturity of the firm's debt....
Persistent link: https://www.econbiz.de/10011740702
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Macroeconomic Stress-Testing of Mortgage Default Rate Using a Vector Error Correction Model and Entropy Pooling
Ardia, David - 2017
' population (i.e., aggregate probability of default) through simulation from a vector error correction model and entropy pooling …
Persistent link: https://www.econbiz.de/10012968851
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Strategic Default on First and Second Lien Mortgages During the Financial Crisis
Jagtiani, Julapa - 2019
Strategic default behavior suggests that the default process is not only a matter of inability to pay. Economic costs and benefits affect the incidence and timing of defaults. As with prior research, the authors find that people default strategically as their home value falls below the mortgage...
Persistent link: https://www.econbiz.de/10012905985
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Contagious defaults in inter-bank networks
Elminejad, Mohammad Ali - 2018
This paper investigates systemic risk and contagion processes in the inter-bank network using network science methods. The inter-bank network consisting 10 banks, similar to the real world inter-bank networks, is studied to understand the contagion process in the network regarding changes in the...
Persistent link: https://www.econbiz.de/10011949714
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Distress and Default Contagion in Financial Networks
Veraart, Luitgard Anna Maria - 2019
We develop a new model for solvency contagion that can be used to quantify systemic risk in stress tests of financial networks. In contrast to many existing models it allows for the spread of contagion already before the point of default and hence can account for contagion due to distress and...
Persistent link: https://www.econbiz.de/10012861689
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Distress and Default Contagion in Financial Networks
Veraart, Luitgard Anna Maria - 2018
We develop a new model for solvency contagion that can be used to quantify systemic risk in stress tests of financial networks. In contrast to many existing models it allows for the spread of contagion already before the point of default and hence can account for contagion due to distress and...
Persistent link: https://www.econbiz.de/10012932974