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Author: Gábor Fukker
Publisher:
ISBN: 9789289952767
Category :
Languages : en
Pages : 0
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Book Description
Overlapping portfolios constitute a well-recognised source of risk, providing a channel for financial contagion induced by the market price impact of asset deleveraging. We introduce a novel method to assess the market price impact on a security-by-security basis from historical daily traded volumes and price returns. Systemic risk within the euro area financial system of banks and investment funds is then assessed by considering contagion between individual institutions' portfolio holdings under a severe stress scenario. As a result, we show how the bias of more homogeneous estimation techniques, commonly employed for market impact, might lead to loss estimates that are more than twice as large as losses estimated with heterogeneous price impact parameters. Another new feature in this work is the application of a price-at-risk measure instead of the average market price impact to evaluate the tail risk of possible market price movements in scenarios of different severity. Our results also show that system-level losses at the tail can be three times higher than average losses using the same scenario.
Author: Gábor Fukker
Publisher:
ISBN: 9789289952767
Category :
Languages : en
Pages : 0
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Book Description
Overlapping portfolios constitute a well-recognised source of risk, providing a channel for financial contagion induced by the market price impact of asset deleveraging. We introduce a novel method to assess the market price impact on a security-by-security basis from historical daily traded volumes and price returns. Systemic risk within the euro area financial system of banks and investment funds is then assessed by considering contagion between individual institutions' portfolio holdings under a severe stress scenario. As a result, we show how the bias of more homogeneous estimation techniques, commonly employed for market impact, might lead to loss estimates that are more than twice as large as losses estimated with heterogeneous price impact parameters. Another new feature in this work is the application of a price-at-risk measure instead of the average market price impact to evaluate the tail risk of possible market price movements in scenarios of different severity. Our results also show that system-level losses at the tail can be three times higher than average losses using the same scenario.
Author: E. Porras
Publisher: Springer
ISBN: 1137358769
Category : Social Science
Languages : en
Pages : 303
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Book Description
Understanding the formation of bubbles and the contagion mechanisms afflicting financial markets is a must as extreme volatility events leave no market untouched. Debt, equity, real estate, commodities... Shanghai, NY, or London: The severe fluctuations, explained to a large extent by contagion and the fear of new bubbles imploding, justify the newly awaken interest in the contagion and bubble dynamics as yet again the world brazes for a new global economic upheaval. Bubbles and Contagion in Financial Markets explores concepts, intuition, theory, and models. Fundamental valuation, share price development in the presence of asymmetric information, the speculative behavior of noise traders and chartists, herding and the feedback and learning mechanisms that surge within the markets are key aspects of these dynamics. Bubbles and contagion are a vast world and fascinating phenomena that escape a narrow exploration of financial markets. Hence this work looks beyond into macroeconomics, monetary policy, risk aggregation, psychology, incentive structures and many more subjects which are in part co-responsible for these events. Responding to the ever more pressing need to disentangle the dynamics by which financial local events are transmitted across the globe, this volume presents an exhaustive and integrative outlook to the subject of bubbles and contagion in financial markets. The key objective of this volume is to give the reader a comprehensive understanding of all aspects that can potentially create the conditions for the formation and bursting of bubbles, and the aftermath of such events: the contagion of macro-economic processes. Achieving a better understanding of the formation of bubbles and the impact of contagion will no doubt determine the stability of future economies – let these two volumes be the starting point for a rational approach to a seemingly irrational phenomena.
Author: Stephane Goutte
Publisher: World Scientific
ISBN: 981121025X
Category : Business & Economics
Languages : en
Pages : 355
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Book Description
The link between commodities prices and the business cycle, including variables such as real GDP, industrial production, unemployment, inflation, and market uncertainty, has often been debated in the macroeconomic literature. To quantify the impact of commodities on the economy, one can distinguish different modeling approaches. First, commodities can be represented as the pinnacle of cross-sectional financial asset prices. Second, price fluctuations due to seasonal variations, dramatic market changes, political and regulatory decisions, or technological shocks may adversely impact producers who use commodities as input. This latter effect creates the so-called 'commodities risk'. Additionally, commodities price fluctuations may spread to other sectors in the economy, via contagion effects. Besides, stronger investor interest in commodities may create closer integration with conventional asset markets; as a result, the financialization process also enhances the correlation between commodity markets and financial markets.Our objective in this book, Risk Factors and Contagion in Commodity Markets and Stocks Markets, lies in answering the following research questions: What are the interactions between commodities and stock market sentiment? Do some of these markets move together overtime? Did the financialization in energy commodities occur after the 2008 Global Financial Crisis? These questions are essential to understand whether commodities are driven only by their fundamentals, or whether there is also a systemic component influenced by the volatility present within the stock markets.
Author: Stijn Claessens
Publisher: Springer Science & Business Media
ISBN: 1475733143
Category : Business & Economics
Languages : en
Pages : 461
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Book Description
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.
Author: Stéphane Goutte
Publisher: Springer Nature
ISBN: 3030985423
Category : Business & Economics
Languages : en
Pages : 137
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Book Description
This book analyses the impact of the COVID-19 pandemic in different areas of Finance emphasizing the contagion effect in capital markets. The volume presents evidence-based case studies from the global financial crisis that followed after the onset of the pandemic in March 2020.
Author: Falk Bräuning
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: Mrs.Jana Bricco
Publisher: International Monetary Fund
ISBN: 1513517856
Category : Business & Economics
Languages : en
Pages : 49
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Book Description
The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country’s financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country’s financial system under various circumstances. We survey current approaches at the IMF for analyzing interconnectedness within the interbank, cross-sector and cross-border dimensions through an overview and examples of the data and methodologies used in the Financial Sector Assessment Program. Finally, this paper offers practical advice on how to interpret results and discusses potential financial stability policy recommendations that can be drawn from this type of in-depth analysis.
Author: Mr.Paul Cashin
Publisher: International Monetary Fund
ISBN: 1451853289
Category : Business & Economics
Languages : en
Pages : 58
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Book Description
This paper investigates empirically the degree of international integration of industrial and emerging country equity markets. It analyzes two issues: first, the extent to which equity prices have tended to move similarly across countries and regions in the long run; and second, the strength of cross-country “contagion” effects. The paper’s findings suggest that both intra-regional and inter-regional linkages across national equity markets have strengthened in recent years. In addition, using impulse response functions, the paper shows that cross-country contagion effects of country-specific shocks dissipate in a matter of weeks while contagion effects of global shocks take several months to unwind themselves.
Author: Albert S. Kyle
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
This paper models financial contagion as a wealth effect of financial intermediaries in a market with two risky assets and three types of traders: noise traders who trade in one market, financial intermediaries who partially arbitrage away noise trading, and long-term investors who provide liquidity. Contagion is characterized as decreased liquidity, increased volatility in both markets, and increased correlation between returns on the two assets occurring simultaneously with financial intermediaries suffering losses on positions. When financial intermediaries have reduced capital as a result of trading losses, they have a reduced capacity for bearing risks. This motivates them to liquidate positions in both markets, resulting in reduced market liquidity, increased price volatility in both markets, and increased correlation. Through this mechanism, the wealth effect leads to contagion. Financial intermediaries are assumed to follow consumption and portfolio rules which make them look like a log-utility investor: the volatility of their portfolio equals the Sharpe ratio available in the market and the dividend rate (i.e., consumption rate) equals the rate of time preference. They trade in two markets with independent fundamentals and constant dollar total risk. As the financial intermediaries partially arbitrage away the effects of noise trading in one market, they take large risky arbitrage positions. Long-term investors provide some liquidity, which makes it possible for financial intermediaries to liquidate positions when they suffer losses. The equilibrium has two state variables, the wealth of financial intermediaries and noise trading. A system of two simultaneous partial differential equations is solved numerically using a projection method. This model cautions risk managers to evaluate risks using information about the capitalization and positions of other market participants.
Author: Eva R. Porras
Publisher: Springer
ISBN: 1137524421
Category : Business & Economics
Languages : en
Pages : 283
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Book Description
This book focuses on extending the models and theories (from a mathematical/statistical point of view) which were introduced in the first volume to a more technical level. Where volume I provided an introduction to the mathematics of bubbles and contagion, volume II digs far more deeply and widely into the modeling aspects.
