1,721,002 research outputs found
The effects of stress testing on US banks' off-balance sheet activities
Full text linkThis paper investigates the effects of the new post-financial crisis regulatory regime – risk-based capital ratios (RBC) and stress tests – on banks' off-balance sheet activities (OBS). We use a panel of US bank holding companies over the period 2001–2018 to examine the relationship between banks' capital levels and OBS activities. Our major finding is that banks significantly reduced their OBS exposure following the introduction of the new capital regulatory framework requirements. In particular, we show that tighter regulatory RBC resulted in a reduction of OBS activities in well-capitalised banks. Conversely, we find that under-capitalised banks increased their OBS activities, which suggests the possibility of regulatory arbitrage
CDX and iTraxx and their relation to the systemically important financial institutions: Evidence from the 2008-2009 financial crisis
Full text linkThis paper empirically investigates the linkages between the CDS index market and the
equity returns of a sample of systemically important financial institutions (SIFIs). Both the 5-
year investment grade iTraxx Europe and the 5-year investment grade CDX North America
indexes are adopted as a market consensus of the overall credit risk in the financial system.
Through a multivariate VAR model using historical data, the investigation uncovers three key
findings. First, the equity returns for all systematically important institutions are inversely
associated to shocks in the CDS index market. Second, European institutions demonstrate a
stronger connection with the iTraxx whilst the US institutions are more closely related to the
CDX. Furthermore, volatility originating in the CDS index market is unambiguously
transmitted to both the insurance and the banking sector. Third, US banks are most severely
distressed by the volatility transmission mechanism whilst European insurers are least
affected
The Subprime Asset-Backed Securities Market and the Equity Prices of Large Complex Financial Institutions
No full textIn this paper, we investigate the relationship between the subprime asset-backed collateralized debt obligations (CDO) market and Large Complex Financial Institutions (LCFIs). We attempt to account for the dynamics between the ABX index returns and the banks' equity returns through conditioning our analysis on the historical correlation between the variables. Three key results emerge from the analysis. First, we find a positive correlation between movements of the ABX index and the equity returns for all the LCFIs. Second, the volatility of ABX index returns tend to be transmitted to the volatilities of the equity returns of the financial institutions. Third, ABX prices changes lead equity returns changes of the European-based LCFIs. For the US LCFIs a two-way linkage emerges
Are there benefits to being naked? The returns and diversification impact of capital structure arbitrage
No full textForecasting options prices using discrete time volatility models estimated at mixed timescales
Full text linkOption pricing models traditionally have utilized continuous-time frameworks to derive solutions or Monte Carlo schemes to price the contingent claim. Typically these models were calibrated to discrete-time data using a variety of approaches. Recent work on GARCH based option pricing models have introduced a set of models that easily can be estimated via MLE or GMM directly from discrete time spot data. This paper provides a series of extensions to the standard discrete-time options pricing setup and then implements a set of various pricing approaches for a very large cross-section of equity and index options against the forward-looking traded market price of these options, out-of-sample. Our analysis provides two significant findings. First, we provide clear evidence that including autoregressive jumps in the options model is critical in determining the correct price of heavily out-of-the money and in-the-money options relatively close to maturity. Second, for longer maturity options, we show that the anticipated performance of the popular component GARCH models, which exhibit long persistence in volatility, does not materialize. We ascribe this result in part to the inherent instability of the numerical solution to the option price in the presence of component volatility. Taken together, our results suggest that when pricing options, the first best approach is to include jumps directly in the model, preferably using jumps calibrated from intraday data
A multi-temporal, rst-based, amsr-e data analysis for radio frequency interference investigation: a possible impact on soil wetness retrievals
No full textSeveral satellite microwave radiometers may be used for soil moisture retrieval. Among these, the Advanced Microwave Scanning Radiometer on Earth Observing System (AMSR-E), is the one that, mainly for its spectral characteristics, should have given more reliable results. Unfortunately, after its launch diffuse C-band Radio- Frequency Interferences (RFI) were discovered contaminating AMSR-E radiances over many areas in the world reducing and/or limiting its operating use. In this work, the multi-temporal RST (Robust Satellite Techniques) approach has been implemented using AMSR-E C-band data. The main objective of such an analysis has been to investigate the possible improvement, both in terms of quality and reliability, of AMSR-E soil moisture retrieval that, a differential approach like RST, may produce. Preliminary results obtained applying this approach to the flooding event which affected some European countries during the summer 2002, are presented in this paper. First obtained outcomes seem to confirm, also for comparison with the standard AMSR-E soil moisture products daily provided by NASA (National Aeronautics and Space Administration), the efficiency of the proposed approach in monitoring soil wetness variations in the space-time domain by using AMSR-E C-band data without need auxiliary or ancillary information
Sovereign CDS and mutual funds: global evidence
No full textIn this paper, we study the impact of sovereign CDS on equity mutual funds across 24 developed and emerging market countries. Our investigation builds on the premise that mutual funds flow and performance respond negatively to increased default risk as measured via sovereign CDS entities. As predicted by our theory, we find that i) sovereign CDS spreads are indeed associated with decreased mutual funds return performance and ii) sovereign CDS spreads covary negatively with subsequent fund flow. This is consistent with investors being sensitive to the pricing information conveyed by the sovereign CDS market. Finally, we find that the impact of sovereign CDS spreads on mutual funds’ performance and flow is more pronounced among emerging market countries. Overall, these findings imply that mutual funds players could make extensive use of the information arising from CDS trading activity. In explaining these results, we emphasize the important implications for investors in mutual funds’ assets portfolios and for country-specific equity funds
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
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