Download or read book Three Essays on Systemic Risk and Financial Contagion written by Adrian Alter and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Market Instability written by Michael Manz and published by . This book was released on 2004 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Financial Networks Systemic Risk and Policy written by Peng Sui and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This essay consists of three chapters. Chapter one extends Allen and Gale's (2000) model to a core-periphery network structure. We identify that the financial contagion in core-periphery structure is different to Allen and Gale (2000) in two aspects. Firstly, the shocks to the periphery bank and to the core bank have different contagion processes. Secondly, contagion not only depends on the amount of claims a bank has on a failed bank, but also on the number of links the failed neighbour has. Chapter two studies the policy effect on financial network formation when the government has time-inconsistency problem on bailing out systemically important bank. We show that if interbank deposits are guaranteed, the equilibrium network structure is different from the one under market discipline. We show that under market discipline individual banks can collectively increase the component size using interbank intermediation in order to increases the severity of systemic risk and hence trigger the bailout. If interbank intermediation is costly the equilibrium network has core-periphery structure. Chapter three follows Acharya and Yorulmazer's (2007) study of the "too many to fail" problem in a two-bank model. They argue that in order to reduce the social losses, the financial regulator finds it ex post optimal to bail out every troubled bank if they fail together, because the acquisition of liquidated assets by other investors result in a high misallocation cost. In contrast to their paper, we argue that there is no "too many to fail" bailout, unless banking capital is costly and market price sensitive. We argue that market price sensitive capital can induce banks herding and high social cost.

Download or read book Financial Market Instability written by Michael Manz and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Systemic Risk and Stock Market Contagion written by Claudio Nicolai Wewel and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Systemic Risk written by Benjamin Rodney Woodruff and published by . This book was released on 2015 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine three topics related to systemic risk which not usually considered in mainstream research. I find evidence that coffee price risk might be hedged by Ugandan producers, possibly mitigating the risk of economy-wide devastation. I provide evidence that there is a long history of a relationship between real estate lending and bank failures, which have threatened economic collapse several times in American history. And I show the potential benefits of an options market for temporary shelter for persons fleeing natural disasters, history's most unforgiving threat to individuals and nations. All three papers contribute to the understanding of systemic risk, providing important insights for policymakers and avenues for further research.

Download or read book Essays on Systemic Risk written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1: Introduction Chapter 2: Systemic Risk: Is the Banking Sector Special? In this paper we empirically investigate the degree of systemic risk in the banking sector versus other industry sectors in the United States and in Germany. We characterize the systemic risk in each sector by the lower tail dependence of stock returns. Our study differs from the existing literature in three aspects. First, we compare the degree of systemic risk in the banking sector with other sectors in the economy. Second, we analyze how the systemic risk depends on the state of the economy. Third, we address the problem of systemic risk in an international context by comparing the US and the German banking system. Our study shows in most cases considered that the systemic risk of the banking sector is significantly larger than in all other sectors. Especially it differs from the systemic risk in the insurance sector, the second strongly regulated financial subsystem. Moreover, the degree of systemic risk is higher under adverse market conditions. Finally, we find that the banking sector in Germany shows a lower systemic risk than the US banking sector. Chapter 3: Intra-Industry Contagion Effects of Earnings Surprises in the Banking Sector In this paper we investigate whether contagion is present in the banking sector by analyzing how banks are affected by negative earnings surprises from their competitors. The banking sector is of crucial importance for the economy and, thus, highly regulated on an individual bank level. However, a high degree of contagion risk should call for a regulation of the financial network rather than solely regulating on an individual level. To be able to make a judgment about the magnitude of possible contagion effects we compare the results of the banking sector with the results of the non-banking industries. We find that earnings surprises cause significant contagion in the banking sector. In contrast, we do not find this effect in the non-banking sector.

Download or read book Essays in Financial Systemic Risk written by Hieu Vu Dang and published by . This book was released on 2020 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I study the financial systemic risk from firm-level perspectives. Chapter 1 investigates a breakdown of the total financial system risk into individual contributors and sources. Chapter 2 studies a theoretical model about the active balance sheet management of individual bank in securitization. Chapter 3 and 4 present empirical evidence about securitization asset choices of banks when they face different constraints. Chapter 5 provides a brief summary of findings in this dissertation. In chapter 1, I propose a novel systemic importance (SI) index that tracks the contribution of a financial institution to the total financial system risk. That risk measure can be decomposed into idiosyncratic and spillover risk contribution to further study the risk characteristics of each firm. Using equity return data from 1965 to 2018, I find two important results. First, the spillover risk can account for approximately 80% of the aggregate financial system risk, which emphasizes the importance of contagion risk as a major amplification mechanism of shocks during a systemic event. Second, a portfolio of the top 20 most systemically important financial institutions (SIFIs), ranked by SI index, earns a significantly lower risk-adjusted return than their counterparts. This substantial equity funding cost advantage of approximately 4% per year on average implies that the ex-ante implicit government guarantee for the “too-important-to-fail” is priced by the market. In chapter 2, I develop a theoretical model that features two benefits of securitization. First, banks can reduce idiosyncratic risks and enhance risk-absorbing capacity by converting a fraction of their risky investments into securitized assets. Second, securitized assets require less regulatory capital, helping banks obtain a higher leverage without breaking the regulation. This chapter studies effects of the two motives above, namely risk-transferring and regulatory arbitrage, on bank portfolio choices. My analytical results predict that banks would securitize safer loans and retain only higher-risk, higher-return assets that justify their regulatory capital cost. In chapter 3, I analyze new data points in the recently revamped HMDA data to examine mortgage securitization decision choices and motives of all non-exempt banks in the US. Combining with the bank-level data from Call Reports, I find that capital-constrained banks retain riskier loans and involve more in the securitization market to optimize return on capital and keep regulatory ratios in control. On the other hand, risk-constrained banks use securitization mainly for the purpose of risk and liquidity improvement. When putting together, risk transferring seems to dominate regulatory arbitrage as the main reason banks engage in securitization. Chapter 4 serves as a complementary case study to Chapter 3, in which I investigate the mortgage loan approval and securitization decision of PNC Bank. There are three interesting findings: First, the bank uses third-party automated underwriting systems to originate over 90% of its conforming residential mortgage loans and then sell more than 70% of them. Second, the bank retains safer loans on balance sheet, which emphasizes the role of securitization as a risk-transferring mechanism. Third, compared to a non-depository financial institution (shadow bank), a traditional commercial bank like PNC behaves differently and shows a clear presence of active securitization management. With a stable deposit funding channel, PNC is able to originate jumbo loans at a higher approval rate, retain more loans on balance sheet, and selectively choose to sell off riskier loans.

Download or read book Three Essays on Financial Risks Using High Frequency Data written by Serge Luther Nyawa Womo and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is about financial risks and high frequency data, with a particular focus on financial systemic risk, the risk of high dimensional portfolios and market microstructure noise. It is organized on three chapters. The first chapter provides a continuous time reduced-form model for the propagation of negative idiosyncratic shocks within a financial system. Using common factors and mutually exciting jumps both in price and volatility, we distinguish between sources of systemic failure such as macro risk drivers, connectedness and contagion. The estimation procedure relies on the GMM approach and takes advantage of high frequency data. We use models' parameters to define weighted, directed networks for shock transmission, and we provide new measures for the financial system fragility. We construct paths for the propagation of shocks, firstly within a number of key US banks and insurance companies, and secondly within the nine largest S&P sectors during the period 2000-2014. We find that beyond common factors, systemic dependency has two related but distinct channels: price and volatility jumps. In the second chapter, we develop a new factor-based estimator of the realized covolatility matrix, applicable in situations when the number of assets is large and the high-frequency data are contaminated with microstructure noises. Our estimator relies on the assumption of a factor structure for the noise component, separate from the latent systematic risk factors that characterize the cross-sectional variation in the frictionless returns. The new estimator provides theoretically more efficient and finite-sample more accurate estimates of large-scale integrated covolatility, correlation, and inverse covolatility matrices than other recently developed realized estimation procedures. These theoretical and simulation-based findings are further corroborated by an empirical application related to portfolio allocation and risk minimization involving several hundred individual stocks. The last chapter presents a factor-based methodology to estimate microstructure noise characteristics and frictionless prices under a high dimensional setup. We rely on factor assumptions both in latent returns and microstructure noise. The methodology is able to estimate rotations of common factors, loading coefficients and volatilities in microstructure noise for a huge number of stocks. Using stocks included in the S&P500 during the period spanning January 2007 to December 2011, we estimate microstructure noise common factors and compare them to some market-wide liquidity measures computed from real financial variables. We obtain that: the first factor is correlated to the average spread and the average number of shares outstanding; the second and third factors are related to the spread; the fourth and fifth factors are significantly linked to the closing log-price. In addition, volatilities of microstructure noise factors are widely explained by the average spread, the average volume, the average number of trades and the average trade size.

Download or read book Three Essays in Financial Networks and Shock Propagation written by Jonas Heipertz and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial inter-dependencies are since the financial crisis at the forefront of macroeconomic research and policy making. The world had painfully learned how small and localized events can travel through the global financial system with huge repercussions for the real economy. Since then, many studies have analyzed the propagation properties of given financial exposure networks. Each day, however, large amounts of financial assets are traded and financial institutions' balance-sheets change in response to new information, regulation or monetary policy. Changes in exposures crucially affect the transmission of shocks. This thesis develops general equilibrium frameworks that show how financial networks emerge endogenously from trade in financial assets between heterogeneous institutions. I use micro and macro-level datasets including confidential data from the Banque de France to structurally identify risk-preferences, institutions' beliefs about the distribution of future financial asset returns, and the specific constraints that drive financial network formation. The thesis also derives an explicit firm-level link of financial networks to an economy's productive structure.Chapter 1 of the thesis shows how firm-level productivity shocks propagate through financial networks. If firms need external funds to finance capital expenditure, banks create linkages between them that go beyond their input-output relationships. These links can affect aggregate output. The chapter builds a multi-sector production model of heterogeneous firms that are financed by heterogeneous leverage targeting banks. Banks are themselves connected through bilateral cross-holdings. Endogenous financial asset prices introduce a new propagation channel of productivity shocks. Structural parameters such as bank-level leverage constraints determine the strength of this channel and one statistic is sufficient to capture it. I use confidential matched bank-firm-level data from the Banque de France on corporate bond investments to estimate the model. The model can be used to study macro-prudential regulation and monetary policy.Chapter 2 uses bank- and instrument-level data on asset holdings and liabilities to identify and estimate a general equilibrium model of trade in financial instruments shaping an endogenous network of interlinked banks' balance-sheets. Bilateral ties are formed as each bank selects the size and the diversification of its assets and liabilities. Shocks propagate due to the response, rather than the size, of bilateral ties to such shocks. The network exhibit key theoretical properties: (i) more connected networks lead to less amplification of partial equilibrium shocks, (ii) the influence of a bank's equity is independent of the size of its holdings; (iii) more risk-averse banks are more diversified, lowering their own volatility but increasing their influence on other banks. The structural estimation of the network model for the universe of French banks shows that the endogenous change in the network matters two to three times more than the initial network of cross-holdings for the transmission of shocks. The estimated network is used to assess the effects of the ECB's quantitative easing policy.Chapter 3 concludes the thesis with a more aggregated sector-level analysis. It first studies how the sharp deterioration of the net external portfolio position of France between 2008 and 2014 was driven by sectoral patterns such as the banking sector retrenchment and the increase in foreign liabilities of the public and corporate sectors but was mitigated by the expansion of domestic and foreign asset portfolios of insurance companies. It provides a network representation of the links between domestic sectors and the rest of the world. Sectoral shock propagation through inter-sectoral security holdings is studied in an estimated balance-sheet contagion model.

Download or read book Empirical Essays on Systemic Risk and Financial Markets During the Crisis written by Alexander Schmidt and published by . This book was released on 2014 with total page 141 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Financial Crisis written by Michael Pomerleano and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Social Trust and the Management of Risk written by George Cvetkovich and published by Routledge. This book was released on 2013-12-16 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt: Social trust is a crucial issue to many aspects of modern society. Policy makers continually aspire to winning it and corporations frequently run the risk of losing it. The 'trust deficit' raises vital questions and problems to which until recently there have been few answers or solutions. Experts from both sides of the Atlantic explore the importance for trust of various influences, from individual perceptions to organizational systems, and consider the conditions involved in building or undermining trust. Several authors examine practical hazard management issues, including medical vaccination programmes and popular participation in pollution control and waste management as strategies for enhancing social trust. This book provides insightful analysis for researchers and students of environmental and social sciences and is essential reading for those engaged in risk management in both the public and private sectors.

Download or read book The Financial Crisis Inquiry Report written by Financial Crisis Inquiry Commission and published by Cosimo, Inc.. This book was released on 2011-05-01 with total page 692 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.

Download or read book Financial Integration Specialization and Systemic Risk written by Falko Fecht and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book International Financial Contagion written by Stijn Claessens and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 461 pages. Available in PDF, EPUB and Kindle. Book excerpt: No sooner had the Asian crisis broken out in 1997 than the witch-hunt started. With great indignation every Asian economy pointed fingers. They were innocent bystanders. The fundamental reason for the crisis was this or that - most prominently contagion - but also the decline in exports of the new commodities (high-tech goods), the steep rise of the dollar, speculators, etc. The prominent question, of course, is whether contagion could really have been the key factor and, if so, what are the channels and mechanisms through which it operated in such a powerful manner. The question is obvious because until 1997, Asia's economies were generally believed to be immensely successful, stable and well managed. This question is of great importance not only in understanding just what happened, but also in shaping policies. In a world of pure contagion, i.e. when innocent bystanders are caught up and trampled by events not of their making and when consequences go far beyond ordinary international shocks, countries will need to look for better protective policies in the future. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy measures to help avoid, or at least contain, financial crises.

Download or read book Understanding Financial Crises written by Ensar Yılmaz and published by Routledge. This book was released on 2020-07-30 with total page 359 pages. Available in PDF, EPUB and Kindle. Book excerpt: Incorporating a broad range of economic approaches, Understanding Financial Crises explores the merits of various arguments and theories which have been used to explain the causes of financial crises. The book explores eight of these different explanations: underconsumption, debt accumulation, financialization, income inequality, financial fragility, tendency of rate of profit to fall, human behavior, and global imbalances. The introduction provides a brief overview of each argument along with a comparison of their relative merits. Each chapter then introduces one of the arguments, explores a historical case, and focuses on the insights that can be gleaned into the global crisis in 2007–2008. The book draws on insights from various schools of thought including post-Keynesian economics, Marxist economics, behavioral economics, neoclassical economics, and more, to provide a pluralist overview of the causes of economic crises in general and the Great Recession in particular. This book marks a significant contribution to the literature on economic and financial crises, political economy and heterodox economics. It is well suited to academicians, practitioners, and financial analysts working within the relevant fields.