Financial contagion

Part 1 of ebook "Managing in recovering markets" provides readers with contents including: Chapter 1 - A dynamic conditional correlation analysis-­based approach to test financial contagion in developing markets; Chapter 2 - Achieving business agility through service-­oriented architecture in recovering markets; Chapter 3 - An analysis of foreign direct investment with special reference to indian economy; Chapter 4 - An empirical analysis of price discovery in indian commodity markets; Chapter 5 - An empirical study on factors affecting faculty retention in indian business schools; Chapter ...

239p giangmacvien 22-06-2024 2 1   Download

To study the contagious effects of financial risks in South Asia’s emerging stock markets, the main stock indexes from China, Thailand, India, Vietnam and Malaysia are chosen during the period from 2006 and 2014. The paper used the dynamic conditional correlation GARCH model to examine the dynamic relevance, and introduced the dummy variable in order to test whether the structure change had occurred after the global financial crisis. The results showed that the degree of relevance of China, Thailand, India and Malaysia stayed in the high level.

15p nguyenanhtuan_qb 09-07-2020 33 4   Download

This research paper used a quantitative research design where econometric models were used in the analysis. The entire population of the listed firms in the NSE was used. Primary data was collected from the licensed market participants at the NSE.

16p kelseynguyen 26-05-2020 34 2   Download

By analysing the risk of interbank contagion during two distinctive crises, namely the Finnish banking crisis in the 1990s and the most recent financial crisis of the 2000s, this paper provides evidence on negative domino effects in a small open economy with a concentrated banking system. Simulations based on interbank exposures and maximum entropy estimations shed light on the magnitude of the contagion and the vulnerability to cross-border risks.

21p 035522894 13-04-2020 17 2   Download

The analysis of time varying correlation between stock prices and exchange rates in the context of international investments has been well researched in the literature in last few years.

27p trinhthamhodang2 21-01-2020 16 4   Download

This paper follows Allen and Gale (2000) to model financial contagion as an equilibrium phenomenon. I assume a two-country economy where banks in each country hold interregional claims on other banks to provide insurance against liquidity preference shocks. The results replicate Allen-Gale model.

8p vimadrid2711 18-12-2019 18 0   Download

The domino model of contagion is fl awed, and is not useful for understanding fi nancial contagion in a modern, market-based fi nancial system. Instead, the key to understanding the events of 2007 is to follow the reactions of the fi nancial institutions themselves to price changes, and to shifts in the measured risks. Financial institutions manage their balance sheets actively in response to price changes and to changes in measured risk. Since market-wide events are felt simultaneously by all market participants, the reactions to such events are synchronized.

0p doipassword 01-02-2013 38 4   Download

Here, bank A has borrowed from bank B, and bank B has borrowed from bank C, etc. Then, if A takes a hit and defaults, then bank B will suffer a loss. If the loss is large enough to wipe out B’s capital, then B defaults. Bank C then takes a hit. In turn, if the loss is big enough, bank C defaults, etc. We could dub this the “domino” model of fi nancial contagion. If the domino model of fi nancial contagion is the relevant one for our world, then defaults on subprime mortgages would have had...

13p doipassword 01-02-2013 36 4   Download

The close link between the financial cycle and financial crises underlies the fourth empirical feature: it is possible to measure the build-up of risk of financial crises in real time with fairly good accuracy. Specifically, the most promising leading indicators of financial crises are based on simultaneous positive deviations (or “gaps”) of the ratio of (private sector) credit-to- GDP and asset prices, especially property prices, from historical norms (Borio and Drehmann (2009), Alessi and Detken (2009)).

36p mebachano 01-02-2013 39 3   Download

Our approach has some similarities to the epidemiological literature on the spread of disease in networks (see, for example, Anderson and May (1991), Newman (2002), Jackson and Rogers (2007), or the overview by Meyers (2007)). But there are two key differences. First, in epidemiological models, the susceptibility of an individual to contagion from a particular infected `neighbour' does not depend on the health of their other neighbours.

78p mebachano 01-02-2013 43 4   Download

In what follows, we construct a simple nancial system involving entities with interlocking balance sheets and use these techniques to model the spread and probability of contagious default following an unexpected shock, analytically and numerically. Unlike the generic, undirected graph model of Watts (2002), our model provides an explicit characterisation of balance sheets, making clear the direction of claims and obligations linking nancial institutions. It also includes asset price interactions with balance sheets, allowing the effects of asset-side contagion to be clearly delineated.

0p mebachano 01-02-2013 36 2   Download

The intuition underpinning these results is straightforward. In a highly connected system, the counterparty losses of a failing institution can be more widely dispersed to, and absorbed by, other entities. So increased connectivity and risk sharing may lower the probability of contagious default. But, conditional on the failure of one institution triggering contagious defaults, a high number of nancial linkages also increases the potential for contagion to spread more widely.

390p mebachano 01-02-2013 60 5   Download

We nd that nancial systems exhibit a robust-yet-fragile tendency: while the probability of contagion may be low, the effects can be extremely widespread when problems occur. The model also highlights how a priori indistinguishable shocks can have very different consequences for the nancial system, depending on the particular point in the network structure that the shock hits. This cautions against assuming that past resilience to a particular shock will continue to apply to future shocks of a similar magnitude.

44p mebachano 01-02-2013 42 3   Download

In what follows, we draw on these techniques to model contagion stemming from unexpected shocks in complex nancial networks with arbitrary structure, and then use numerical simulations to illustrate and clarify the intuition underpinning our analytical results. Our framework explicitly accounts for the nature and scale of aggregate and idiosyncratic shocks and allows asset prices to interact with balance sheets.

182p mebachano 01-02-2013 51 5   Download

The most well-known contribution to the analysis of contagion through direct linkages in nancial systems is that of Allen and Gale (2000). 2 Using a network structure involving four banks, they demonstrate that the spread of contagion depends crucially on the pattern of interconnectedness between banks. When the network is complete, with all banks having exposures to each other such that the amount of interbank deposits held by any bank is evenly spread over all other banks, the impact of a shock is readily attenuated. Every bank takes a small `hit' and there is no contagion.

105p mebachano 01-02-2013 45 2   Download

The intuition underpinning these results is as follows. In a highly connected system, the counterparty losses of a failing institution can be more widely dispersed to, and absorbed by, other entities. So increased connectivity and risk sharing may lower the probability of contagious default. But, conditional on the failure of one institution triggering contagious defaults, a high number of nancial linkages also increases the potential for contagion to spread more widely.

54p mebachano 01-02-2013 43 2   Download

Our results suggest that nancial systems may exhibit a robust-yet-fragile tendency: while the probability of contagion may be low, the effects can be extremely widespread when problems occur. The model also highlights how seemingly indistinguishable shocks can have very different consequences for the nancial system depending on whether or not the shock hits at a particular pressure point in the network structure. This helps explain why the evidence of the resilience of the system to fairly large shocks prior to 2007 was not a reliable guide to its future robustness....

32p mebachano 01-02-2013 51 4   Download

Policymaking to deal with the global financial crisis and ensuing global recession has now moved from containing the contagion to specific actions aimed at promoting recovery and changing regulations to prevent a reoccurrence of the problem. Other issues, such as health care and the war in Afghanistan, also are competing for attention. Some have expressed concern that the improving economic and financial outlook may cause regulatory reform of the financial system to lose some traction in the crowded policy agenda.

46p mebachano 01-02-2013 55 3   Download

The process for coping with the crisis by countries across the globe has been manifest in four basic phases. The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent of government reach. The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis.

40p mebachano 01-02-2013 53 4   Download

Financial market infrastructures (FMIs) that facilitate the clearing, settlement, and recording of monetary and other financial transactions can strengthen the markets they serve and play a critical role in fostering financial stability. However, if not properly managed, they can pose significant risks to the financial system and be a potential source of contagion, particularly in periods of market stress. Although FMIs performed well during the recent financial crisis, events highlighted important lessons for effective risk management.

120p enterroi 02-02-2013 66 14   Download