Modeling financial sector joint tail risk in the euro area

Arbeitspapier

We develop a novel high-dimensional non-Gaussian modeling framework to infer measures of conditional and joint default risk for many financial sector firms. The model is based on a dynamic Generalized Hyperbolic Skewed-t block-equicorrelation copula with time-varying volatility and dependence parameters that naturally accommodates asymmetries, heavy tails, as well as non-linear and time-varying default dependence. We apply a conditional law of large numbers in this setting to define joint and conditional risk measures that can be evaluated quickly and reliably. We apply the modeling framework to assess the joint risk from multiple defaults in the euro area during the 2008-2012 financial and sovereign debt crisis. We document unprecedented tail risks during 2011-2012, as well as their steep decline after subsequent policy actions.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Sveriges Riksbank Working Paper Series ; No. 308

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Thema: dynamic equicorrelation ; generalized hyperbolic distribution ; law of large numbers ; large portfolio approximation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lucas, André ; Schwaab, Bernd ; Zhang, Xin
• Ereignis: Veröffentlichung
• (wer): Sveriges Riksbank
• (wo): Stockholm
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/129723
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ