Refine
Year of publication
- 2017 (46) (remove)
Document Type
- Working Paper (46) (remove)
Has Fulltext
- yes (46)
Is part of the Bibliography
- no (46) (remove)
Keywords
- bail-in (3)
- financial stability (3)
- Asset pricing (2)
- Banking Union (2)
- ECB (2)
- EIOPA (2)
- Endogenous growth (2)
- Heterogeneous innovation (2)
- MREL (2)
- Monetary Policy (2)
- TLAC (2)
- financial crisis (2)
- global banks (2)
- market discipline (2)
- systemic risk (2)
- transmission (2)
- 401(k) plan (1)
- ABS (1)
- Asset Prices (1)
- Asymmetric Tax Regimes (1)
- BRRD (1)
- BVerfG (1)
- Bank Lending (1)
- CAPM (1)
- CDS (1)
- Corporate Governance (1)
- Creative destruction (1)
- Culture (1)
- Democratic Legitimacy (1)
- Dodd-Frank Act (1)
- ECJ (1)
- EGC (1)
- EU banks (1)
- EU economic and financial services legislation (1)
- Economic and Monetary Union (1)
- Epstein-Zin preferences (1)
- European Central Bank (1)
- European Insurance Union (1)
- European Insurance and Occupational Pensions Authority (1)
- European Supervisory Authorities (1)
- Expectation Error (1)
- Expectation Formation (1)
- Experience (1)
- Extrapolation (1)
- Financial Crises (1)
- Financial Stability (1)
- Financial stability (1)
- Firm Investment (1)
- Fiscal policy (1)
- Freibetrag (1)
- G-SIB (1)
- Gender Differences (1)
- German cooperative banks (1)
- German retirement system (1)
- German savings banks (1)
- Global Temperature (1)
- Government (1)
- Granger Causality (1)
- Grunderwerbsteuer (1)
- Guidelines (1)
- High-Frequency Traders (HFTs) (1)
- IFRS 9 (1)
- Inclusive Finance (1)
- Insurance (1)
- Insurance Supervision (1)
- Internal Controls (1)
- International finance (1)
- Labor Hoarding (1)
- Landeskreditbank Baden-Württemberg (1)
- Learning (1)
- Liquidity Provision (1)
- Liquidity premium (1)
- Microfinance (1)
- Multi-Layer Network (1)
- NCAs (1)
- Network Combination (1)
- OMT (1)
- ORSA (1)
- Opening Auction (1)
- Own Self Risk Assessment (1)
- Price Discovery (1)
- Principle of Proportionality (1)
- Proprietary Trading (1)
- Quantile Causality (1)
- Quantitative Easing (1)
- R&D (1)
- R&D Investment (1)
- Real Effects (1)
- Reformvorschläge (1)
- Regulation (1)
- Risk Management (1)
- SRM (1)
- SSM (1)
- STS (simple, transparent, and standardized securitizations) (1)
- Share Deals (1)
- Single Supervisory Mechanism (1)
- Social Networks (1)
- Social Security claiming age (1)
- Solvency (1)
- Steuergestaltung (1)
- TIPS (1)
- TIPS–Treasury puzzle (1)
- Technology Adoption (1)
- Technology spillover (1)
- Time Inconsistency (1)
- Trust Game (1)
- Wage Rigidity (1)
- Welfare Costs (1)
- adaptation (1)
- annuity (1)
- asset prices (1)
- asset pricing (1)
- bailout (1)
- bank integration (1)
- bank performance (1)
- bank resolution (1)
- bank stability (1)
- banking and treasury functions (1)
- banking regulation (1)
- banking resolution (1)
- banking separation (1)
- banking supervision (1)
- banks (1)
- capital (1)
- commercial banks (1)
- consumption-portfolio choice (1)
- cooperation (1)
- corporate governance (1)
- cross-border insolvency (1)
- crowdfunding (1)
- crowdinvesting (1)
- delayed retirement (1)
- duration of civil proceedings (1)
- dynamic portfolio choice (1)
- early retirement (1)
- finance and employment (1)
- financial constraints (1)
- financial institutions (1)
- financial markets regulation (1)
- financial resilience (1)
- financing constraint (1)
- financing decisions (1)
- fintech (1)
- general equilibrium (1)
- german banking system (1)
- german banks (1)
- heterogeneous agents (1)
- inflation swaps (1)
- insurance (1)
- interconnections (1)
- interdependent preferences (1)
- internal capital markets (1)
- investment decisions (1)
- investor protection (1)
- jump risk (1)
- law enforcement (1)
- level and slope of implied volatility smile (1)
- lifetime income (1)
- liquidity (1)
- liquidity risk (1)
- long-run growth (1)
- macroprudential franework (1)
- market infrastructure (1)
- mnimum distribution requirements (1)
- money in the utility function (1)
- natural disasters (1)
- network (1)
- newly founded firms (1)
- non-performing assets (1)
- pension (1)
- pensions (1)
- portfolio choice (1)
- precautionary recapitalization (1)
- private sector involvement (1)
- prohibition of proprietary trading (1)
- provisioning rules (1)
- regulation (1)
- repeated games (1)
- retention (1)
- retirement income (1)
- saving (1)
- shocks (1)
- social centralization (1)
- social dilemmas (1)
- social security (1)
- social security claiming (1)
- solvency shocks (1)
- stochastic control (1)
- stochastic volatility (1)
- stock demand (1)
- structured finance (1)
- systematic risk (1)
- tax (1)
- temperature shocks (1)
- volatility (1)
- welfare costs (1)
- wholesale shocks (1)
Institute
- House of Finance (HoF) (46) (remove)
In this paper we propose a way forward towards increased financial resilience in times of growing disagreement concerning open borders, free trade and global regulatory standards. In light of these concerns, financial resilience remains a highly valued policy objective. We wish to contribute by suggesting an agenda of concrete, do-able steps supporting an enhanced level of resilience, combined with a deeper understanding of its relevance in the public domain.
First, remove inconsistencies across regulatory rules and territorial regimes, and ensure their credibility concerning implementation. Second, discourage the use of financial regulatory standards as means of international competition. Third, give more weight to pedagogically explaining the established regulatory standards in public, to strengthen their societal backing.
Coming early to the party
(2017)
We examine the strategic behavior of High Frequency Traders (HFTs) during the pre-opening phase and the opening auction of the NYSE-Euronext Paris exchange. HFTs actively participate, and profitably extract information from the order flow. They also post "flash crash" orders, to gain time priority. They make profits on their last-second orders; however, so do others, suggesting that there is no speed advantage. HFTs lead price discovery, and neither harm nor improve liquidity. They "come early to the party", and enjoy it (make profits); however, they also help others enjoy the party (improve market quality) and do not have privileges (their speed advantage is not crucial).
During the last IAIS Global Seminar in June 2017, IAIS disclosed the agenda for a gradual shift in the systemic risk assessment methodology from the current Entity Based Approach (EBA) to a new Activity Based Approach(ABA). The EBA, which was developed in the aftermath of the 2008/2009 financial crisis, defines a list of Global Systemically Important Insurers (G-SIIs) based on a pre-defined set of criteria related to the size of the institution. These G-SIIs are subject to additional regulatory requirements since their distress or disorderly failure would potentially cause significant disruption to the global financial system and economic activity. Even if size is still a needed element of a systemic risk assessment, the strong emphasis put on the too-big-to-fail approach in insurance, i.e. EBA, might be partially missing the underlying nature of systemic risk in insurance. Not only certain activities, including insurance activities such as life or non-life lines of business, but also common exposures or certain managerial practices such as leverage or funding structures, tend to contribute to systemic risk of insurers but are not covered by the current EBA (Berdin and Sottocornola, 2015). Therefore, we very much welcome the general development of the systemic risk assessment methodology, even if several important questions still need to be answered.
The impact of network connectivity on factor exposures, asset pricing and portfolio diversification
(2017)
This paper extends the classic factor-based asset pricing model by including network linkages in linear factor models. We assume that the network linkages are exogenously provided. This extension of the model allows a better understanding of the causes of systematic risk and shows that (i) network exposures act as an inflating factor for systematic exposure to common factors and (ii) the power of diversification is reduced by the presence of network connections. Moreover, we show that in the presence of network links a misspecified traditional linear factor model presents residuals that are correlated and heteroskedastic. We support our claims with an extensive simulation experiment.
Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used Granger causality to detect the presence of contemporaneous links between financial institutions and, in turn, to obtain a network structure. Subsequent studies combined the estimated networks with traditional pricing or risk measurement models to improve their fit to empirical data. In this paper, we provide two contributions: we show how to use a linear factor model as a device for estimating a combination of several networks that monitor the links across variables from different viewpoints; and we demonstrate that Granger causality should be combined with quantile-based causality when the focus is on risk propagation. The empirical evidence supports the latter claim.
We propose a long-run risk model with stochastic volatility, a time-varying mean reversion level of volatility, and jumps in the state variables. The special feature of our model is that the jump intensity is not affine in the conditional variance but driven by a separate process. We show that this separation of jump risk from volatility risk is needed to match the empirically weak link between the level and the slope of the implied volatility smile for S&P 500 options.
Asymmetric social norms
(2017)
Studies of cooperation in infinitely repeated matching games focus on homogeneous economies, where full cooperation is efficient and any defection is collectively sanctioned. Here we study heterogeneous economies where occasional defections are part of efficient play, and show how to support those outcomes through contagious punishments.
We propose a 2-country asset-pricing model where agents' preferences change endogenously as a function of the popularity of internationally traded goods. We determine the effect of the time-variation of preferences on equity markets, consumption and portfolio choices. When agents are more sensitive to the popularity of domestic consumption goods, the local stock market reacts more strongly to the preferences of local agents than to the preferences of foreign agents. Therefore, home bias arises because home-country stock represents a better investment opportunity for hedging against future fluctuations in preferences. We test our model and find that preference evolution is a plausible driver of key macroeconomic variables and stock returns.
The international diffusion of technology plays a key role in stimulating global growth and explaining co-movements of international equity returns. Existing empirical evidence suggests that countries are heterogeneous in their attitude toward innovation: Some countries rely more on technology adoption while other countries rely more on internal technology production. European countries that rely more on adoption are also typically characterized by lower fiscal policy exibility and higher labor market rigidity. We develop a two-country model – where both countries rely on R&D and adoption – to study the short-run and long-run effects of aggregate technology and adoption probability shocks on economic growth in the presence of the aforementioned asymmetries. Our framework suggests that an increase in the ability to adopt technology from abroad stimulates economic growth in the country that benefits from higher adoption rates but the beneficial effects also spread to the foreign country. Moreover, it helps explaining the differences in macro quantities and equity returns observed in the international data.
We study the general equilibrium implications of different fiscal policies on macroeconomic quantities, asset prices, and welfare by utilizing two endogenous growth models. The expanding variety model features only homogeneous innovations by entrants. The Schumpeterian growth model features heterogeneous innovations: "incremental" innovations by incumbents and "radical" innovations by entrants. The government levies taxes on labor income and corporate profits and supplies subsidies to consumption, capital investment, and investments in research and development by entrants and, if applicable, incumbents. With these models at hand, we provide new insights on the interplay of innovation dynamics and fiscal policy.