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Three Essays On Systemic Risk
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Book Synopsis Three Essays on Systemic Risk by : Sylvain Benoit
Download or read book Three Essays on Systemic Risk written by Sylvain Benoit and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Systemic risk has played a key role in the propagation of the last global financial crisis. A large number ofsystemic risk measures have been developed to quantify the contribution of a financial institution to thesystem-wide risk. However, numerous questions about their abilities to identify Systemically ImportantFinancial Institutions (SIFIs) have been raised since systemic risk has multiple facets, and some of themare difficult to gauge, such as the commonalities across financial institutions.The main goal of this dissertation in finance is thus (i) to propose an empirical solution to identifydomestic SIFIs, (ii) to compare theoretically and empirically different systemic risk measures, and (iii)to measure changes in banks' risk exposures.First, chapter 1 offers an adjustment of three market-based systemic risk measures, designed in a globalframework, to identify domestic SIFIs. Second, chapter 2 introduces a common framework in whichseveral systemic risk measures are expressed and compared. It is theoretically shown that those systemicrisk measures can be expressed as function of traditional risk measures. The empirical application confirmsthese findings and shows that these measures fall short in capturing the multifaceted nature of systemicrisk. Third, chapter 3 proposes the Factor Implied Risk Exposures (FIRE) methodology which breaksdown a change in risk disclosure into a market volatility component and a bank-specific risk exposurecomponent. This chapter empirically illustrates that changes in risk exposures are positively correlatedacross banks, which is consistent with banks exhibiting commonality in trading.
Book Synopsis Three Essays on Systemic Risk and Financial Contagion by : Adrian Alter
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:
Book Synopsis Three Essays in Bank Systemic Risk by : Amir Hossein Khalilzadeh Naghneh
Download or read book Three Essays in Bank Systemic Risk written by Amir Hossein Khalilzadeh Naghneh and published by . This book was released on 2018 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt: Thèse. HEC. 2018
Book Synopsis Three Essays on Systemic Risk by : Benjamin Rodney Woodruff
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.
Book Synopsis Three Essays on Policies Towards Risk by : Cheong-Seok Chang
Download or read book Three Essays on Policies Towards Risk written by Cheong-Seok Chang and published by . This book was released on 2006 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays in Corporate Finance by : Zhehao Jia
Download or read book Three Essays in Corporate Finance written by Zhehao Jia and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays in Financial Economics by : Jingjing Sun
Download or read book Three Essays in Financial Economics written by Jingjing Sun and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays on Finanical Economics by : Yi-An Chen
Download or read book Three Essays on Finanical Economics written by Yi-An Chen and published by . This book was released on 2015 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis discusses network risk and its implications for financial economics. A stock's tendency to co-move with its related stocks is defined as network risk. In the first chapter, I propose a new econometric procedure to estimate network risk using a factor model and show that network risk is not negligible in the 2007-2008 financial crisis. The second chapter examines the pricing of network risk in the cross section of stock expected returns. Using the Fama-McBeth regression, I show that a newly-derived network volatility component of idiosyncratic volatility, termed NVOL, was priced with a 1.01 percent monthly premium between Sep. 1967 and Dec. 2012. This finding suggests a risk-based explanation of the equity premium: Stocks are compensated for risk that arises from shocks to networks that contain them. Finally, the third chapter summarizes various systemic risk measures developed after the financial crisis in 2008. These measures are classified into four categories: (1) Tail dependence; (2) Default probability; (3) Network measure; and (4) Others based on their approach and data required. Robust-yet-Fragile property which is one of the characteristics of a modern financial system is identified as a key to understanding the cascade effects of systemic risk. Network based systemic risk models have great potential to capture this property, both theoretically and empirically.
Book Synopsis Three Essays on Sovereign Credit Risk by : Tingwei Wang
Download or read book Three Essays on Sovereign Credit Risk written by Tingwei Wang and published by . This book was released on 2016 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies sovereign credit risk and its impact on banks and industrial firms. The first essay shows that bank credit risk is linked to sovereign credit risk through common exposure to systemic risk instead of implicit bailout or excessive holding of home country bonds. In the second essay, I build a trade-off model of capital structure which predicts negative correlation between optimal leverage of big firms and sovereign credit risk due to implicit bailout. The model prediction is confirmed by empirical evidence from firms in the euro area. The third essay provides a joint pricing model of CDS and bond to disentangle the default and liquidity component in CDS spread and bond yield spread. I find a remarkable liquidity component in the CDS spreads of peripheral euro area countries and conclude that ignoring CDS illiquidity leads to overestimation of default component in bond yield.
Book Synopsis Three Essays on Systemic Risk and Rating in Crop Insurance Markets by : Joshua D. Woodard
Download or read book Three Essays on Systemic Risk and Rating in Crop Insurance Markets written by Joshua D. Woodard and published by ProQuest. This book was released on 2008 with total page 155 pages. Available in PDF, EPUB and Kindle. Book excerpt: The second essay investigates the loss performance of the Federal Crop Insurance program. Historically, government insurance programs tend to be ineffective at segregating risks, leading to markets that are inefficient. In the case of the Federal Crop Insurance program, rates are set non-competitively. This study develops a spatial econometric model of loss experience and finds evidence of geographic misratings. The results also suggest that substantial actuarial cross-subsidization is resulting from the apparent rating inequities, which has a variety of welfare implications.
Book Synopsis Essays on Systemic Risk by : Marcel Prokopczuk
Download or read book Essays on Systemic Risk written by Marcel Prokopczuk and published by . This book was released on 2009 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays on Financial Risks Using High Frequency Data by : Serge Luther Nyawa Womo
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.
Book Synopsis Three Essays on the Optimal Allocation of Risk with Illiquidity, Intergenerational Sharing and Systemic Institutions by : Daniel Dimitrov
Download or read book Three Essays on the Optimal Allocation of Risk with Illiquidity, Intergenerational Sharing and Systemic Institutions written by Daniel Dimitrov and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Financial Systemic Risk by : Hieu Vu Dang
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.
Book Synopsis Essays on Systemic Risk and Risk Spillovers by : Yi Liu
Download or read book Essays on Systemic Risk and Risk Spillovers written by Yi Liu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays on Financial Markets by : Pawan Jain
Download or read book Three Essays on Financial Markets written by Pawan Jain and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is composed of three essays. The first essay investigates the information content of the limit order book (LOB) on the Shanghai Stock Exchange (SHSE), a purely order-driven market, for predicting future stock price volatility. We find that the LOB supply schedule consistently and significantly predicts the future price volatility. But this predictive power of LOB declines during the extreme market wide movements. We also find that buy orders are more informative over future price volatility than sell orders but sell (buy) orders becomes more informative during the extreme market wide down (up) movement days. Finally, we document that predictive power of LOB is short lived and markets are efficient over the longer time horizon. The second essay examines the effect of high frequency trading on market quality, systemic risk and trading strategies. In 2010 the Tokyo Stock Exchange, the largest exchange headquartered outside the US, introduced a new trading platform, Arrowhead, which reduced latency by 99.97% and increased co-located high-frequency trading from zero to 36% of volume. Arrowhead improved market liquidity and reduced volatility, but it also amplified systematic risks factors like quotes to trade ratio, order-flow autocorrelation and cross correlation, and tail risks. Arrowhead also affected trading strategies by increasing trade price predictability and the use of fleeting orders. Cost of immediacy serves as a channel through which reduced latency affects market quality, systematic risks, and trading outcome. The third essay analyzes the links between corporate finance policies and investment clienteles by comparing the cross-sectional variation in the dividend payout policies of companies across 32 countries. Beyond the impact of firm-specific accounting and financial variables, this study investigates how the country level variations: shareholder demand due to demographic variations and consumption needs, agency problems manifested in the extent of minority shareholder protection and business disclosures, and market quality in terms of transparency and liquidity; affect dividend payout policies. We find that firms have generous dividend payout policies when diverse shareholder demands are strong, extents of business disclosures and legal protections are weak, and the market qualities are poor. The empirical evidence supports the presence of strong dividend clienteles in a global setting. .
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.
