Tail risk
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Quantile Connectedness: Modeling Tail Behavior in the Topology of Financial Networks Open
We develop a new technique to estimate vector autoregressions with a common factor error structure by quantile regression. We apply our technique to study credit risk spillovers among a group of 17 sovereigns and their respective financial…
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TENET: Tail-Event driven NETwork risk Open
CoVaR is a measure for systemic risk of the networked financial system conditional on institutions being under distress. The analysis of systemic risk is the focus of recent econometric analyses and uses tail event and network based techni…
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Delayed Expected Loss Recognition and the Risk Profile of Banks Open
This paper investigates the extent to which delayed expected loan loss recognition ( DELR ) is associated with greater vulnerability of banks to three distinct dimensions of risk: (1) stock market liquidity risk, (2) downside tail risk of …
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Estimation of Tail Risk Based on Extreme Expectiles Open
Summary We use tail expectiles to estimate alternative measures to the value at risk and marginal expected shortfall, which are two instruments of risk protection of utmost importance in actuarial science and statistical finance. The conce…
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Measuring the propagation of financial distress with Granger-causality tail risk networks Open
Using the test of Granger-causality in tail of Hong et al. (2009), we define and construct Granger-causality tail risk networks between 33 systemically important banks (G-SIBS) and 36 sovereign bonds worldwide. Our purpose is to exploit th…
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Tail Risk Dynamics in Stock Returns: Links to the Macroeconomy and Global Markets Connectedness Open
We propose a new time-varying peaks over threshold model to study tail risk dynamics in equity markets: the laws of motion for the parameters are defined through the score-based approach. We apply the model to daily returns from U.S. size-…
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Risk premia: asymmetric tail risks and excess returns Open
We present extensive evidence that “risk premium” is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit a linear relation between the Sharpe ratio of…
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CEO turnover in large banks: Does tail risk matter? Open
In a cross-country setting we show the probability of a forced CEO turnover in large banks is positively associated with idiosyncratic tail risk. This finding is strengthened the greater the competition in the banking industry and when sta…
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Asymmetric relationship between green bonds and Sukuk markets: The role of global risk factors Open
This study investigates the asymmetric connectedness and spillover effects between two ethical fixed-income assets (Sukuk and green bonds) with regard to global risk factors using a sample of 15 Sukuk markets and green bond indices. This c…
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Spillovers at the extremes: The macroprudential stance and vulnerability to the global financial cycle Open
The effects of macroprudential policy on portfolio flows vary considerably across the global financial cycle. A tighter ex-ante macroprudential stance amplifies the impact of global risk shocks on bond and equity flows, increasing outflows…
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Capturing Macroeconomic Tail Risks with Bayesian Vector Autoregressions Open
A rapidly growing body of research has examined tail risks in macroeconomic outcomes. Most of this work has focused on the risks of significant declines in GDP, and has relied on quantile regression methods to estimate tail risks. In this …
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Bayesian Tail Risk Interdependence Using Quantile Regression Open
Recent financial disasters emphasised the need to investigate the consequences associated with the tail co-movements among institutions; episodes of contagion are frequently observed and increase the probability of large losses affecting m…
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Risk modelling of ESG (environmental, social, and governance), healthcare, and financial sectors Open
Climate change poses enormous ecological, socio‐economic, health, and financial challenges. A novel extreme value theory is employed in this study to model the risk to environment al , social, and governance (ESG), healthcare, and financia…
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Tail risk connectedness in clean energy and oil financial market Open
This research investigates the connectedness and the tail risk spillover between clean energy and oil firms, from January 2011 to October 2021. To this, we use the Tail-Event driven NETworks (TENET) risk model. This approach allows for a m…
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Nonparametric Tail Risk, Stock Returns, and the Macroeconomy Open
This paper introduces a new tail-risk measure based on the risk-neutral excess expected shortfall of a cross-section of stock returns. We propose a novel way to risk neutralize the returns without relying on option price information. Empir…
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Tail risk, systemic risk and spillover risk of crude oil and precious metals Open
The relationship between oil prices and metal prices has been extensively investigated. However, the tail risk, systemic risk and spillover risk of oil prices have not been investigated via extreme value theory (EVT). We use this novel app…
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Extreme risk dependence between green bonds and financial markets Open
The current study investigates the extreme risk dependence between green bonds and financial markets by employing the dual approaches of time‐varying optimal copula and extreme risk spillover analysis of dynamic conditional Value‐at‐Risk. …
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Deleveraging Risk Open
Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors expe…
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Equity tail risk and currency risk premiums Open
We find that an option-based equity tail risk factor is priced in the cross section of currency returns; more exposed currencies offer a low risk premium because they hedge against equity tail risk. A portfolio that buys currencies with hi…
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How Superadditive Can a Risk Measure Be? Open
In this paper, we study the extent to which any risk measure can lead to superadditive risk assessments, implying the potential for penalizing portfolio diversification. For this purpose we introduce the notion of extreme-aggregation risk …
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The Pricing of Tail Risk and the Equity Premium: Evidence From International Option Markets Open
We explore the pricing of tail risk as manifest in index options across international equity markets. The risk premium associated with negative tail events displays persistent shifts, unrelated to volatility. This tail risk premium is a po…
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International tail risk connectedness: Network and determinants Open
The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.
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COVID‐19 and tail risk contagion across commodity futures markets Open
This paper examines the impact of COVID‐19 on tail risk contagion across commodity futures markets using a copula‐based network method. We document a significant increase in the lower and upper tail contagiousness of commodities following …
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Backtesting extreme value theory models of expected shortfall Open
We use stock market data to analyze the quality of alternative models and procedures for fore- casting expected shortfall (ES) at different significance levels. We compute ES forecasts from conditional models applied to the full distributi…
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Capital Flows in Risky Times: Risk-on/Risk-off and Emerging Market Tail Risk Open
This paper characterizes the implications of risk-on/risk-off shocks for emerging market capital flows and returns.We document that these shocks have important implications not only for the median of emerging markets flows and returns but …
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Estimating portfolio risk for tail risk protection strategies Open
We forecast portfolio risk for managing dynamic tail risk protection strategies, based on extreme value theory, expectile regression, copula‐GARCH and dynamic generalized autoregressive score models. Utilizing a loss function that overcome…
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Interconnected Risk Contributions: A Heavy-Tail Approach to Analyze U.S. Financial Sectors Open
This paper investigates the dynamic evolution of tail risk interdependence among U.S. banks, financial services and insurance sectors. Life and non-life insurers have been considered separately to account for their different characteristic…
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Assessing Macroeconomic Tail Risk Open
What drives macroeconomic tail risk?To answer this question, we borrow a definition of macroeconomic risk from Adrian et al. (2019) by studying (left-tail) percentiles of the forecast distribution of GDP growth.We use local projections (Jo…
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Tail risk connectedness in G7 stock markets: Understanding the impact of COVID-19 and related variants Open
This study uses a time-varying parameter vector autoregression (TVP-VAR) approach to examine the transmission of tail risk among G7 stock markets from January 2000 to September 2022, focusing on major financial episodes like the dot-com co…
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Dynamic Bivariate Peak Over Threshold Model for Joint Tail Risk Dynamics of Financial Markets Open
We propose a novel dynamic bivariate peak over threshold (PoT) model to study the time-varying behavior of joint tail risk in financial markets. The proposed framework provides simultaneous modeling for dynamics of marginal and joint tail …