Refine
Year of publication
Document Type
- Working Paper (62)
- Part of Periodical (12)
- Article (6)
- Report (1)
Has Fulltext
- yes (81)
Is part of the Bibliography
- no (81)
Keywords
- financial stability (6)
- coronavirus (5)
- OTC markets (4)
- Central Clearing (3)
- Coronavirus (3)
- Corporate Bonds (3)
- Corporate Social Responsibility (3)
- Counterparty Risk (3)
- Covid-19 (3)
- Credit Risk (3)
- Derivatives (3)
- Eligibility premium (3)
- Financial Stability (3)
- Liquidity Provision (3)
- Loss Sharing (3)
- Sustainable Finance (3)
- Sustainable Investments (3)
- COVID-19 (2)
- COVID-19 news (2)
- Capital Markets Union (2)
- Car Loans (2)
- Collateral (2)
- Collateral Policy (2)
- Corporate Debt Structure (2)
- Corporate Finance (2)
- ECB (2)
- ESG Rating Agencies (2)
- ETFs (2)
- European Market Infrastructure Regulation (EMIR) (2)
- Financial Crisis (2)
- Financial Markets (2)
- Hawkes processes (2)
- High-Frequency Traders (HFTs) (2)
- Liquidity (2)
- Liquidity provision (2)
- Margin (2)
- Non-performing Loans (2)
- Price Discovery (2)
- Regulation (2)
- Sovereign Risk (2)
- Systematic Risk (2)
- Systemic Risk (2)
- banking (2)
- competition (2)
- corporate finance (2)
- credit scoring (2)
- probability of default (2)
- public debt (2)
- small and medium enterprises (2)
- Adverse Selection (1)
- Asset Allocation (1)
- Asset Liquidation (1)
- Asset Management Companies (1)
- Auditing (1)
- BRRD (1)
- Bailin (1)
- Bailout (1)
- Bank Bailout (1)
- Bank Capital (1)
- Bank Capitalization (1)
- Bank Recapitalization (1)
- Bank Resolution (1)
- Banking Union (1)
- Board Appointments (1)
- Business Cycle (1)
- CAPM (1)
- CCP (1)
- CDS (1)
- CMU (1)
- Capital Purchase Program (1)
- Central Counterparty Clearing House (CCP) (1)
- Central counterparty clearing house (CCP) (1)
- Centrality (1)
- Collateral policy (1)
- Comovements (1)
- Contagion (1)
- Corporate bonds (1)
- Credit Default Swap (CDS) (1)
- Credit default swap (CDS) (1)
- Derivate (1)
- Designated Market Makers (DMMs) Market Making (1)
- Dictionary (1)
- Disclosure (1)
- Disintegration (1)
- Dividend Payments (1)
- ESG (1)
- ESG Investing (1)
- ESG rating agencies (1)
- ESG ratings (1)
- Energy Efficiency (1)
- Environmental, social, and governance factors (ESG) (1)
- Equity fund (1)
- Euro-zone Government Bonds (1)
- European Central Bank (ECB) (1)
- Feedback (1)
- Financial Crises (1)
- Financial stability (1)
- Fiscal Capacity (1)
- Fixed Income (1)
- Fixed-Income (1)
- Flash Crash (1)
- Flash crash (1)
- Forbearance (1)
- Frictions (1)
- High Frequency Data (1)
- High-Frequency Trading (HFT) (1)
- High-Level-Forum (1)
- High-frequency event study (1)
- Hybrid Markets (1)
- Impulse-response (1)
- Information Frictions (1)
- Insurance Companies (1)
- Interbank Markets (1)
- Interconnectedness (1)
- Interdealer Brokerage (1)
- Interim Report (1)
- Internal Controls (1)
- International Finance (1)
- Investor Protection (1)
- Investor sentiment (1)
- Jumps (1)
- Kontrahentenrisiko (1)
- LSTM neural networks (1)
- Leverage (1)
- Limits to Arbitrage (1)
- Liquidity Coinsurance (1)
- Low-emission vehicles (1)
- MTS Bond Market (1)
- Machine learning (1)
- Market Fragility (1)
- Market Integrity (1)
- Market Liquidity (1)
- Market Microstructure (1)
- Market Oversight (1)
- Market efficiency (1)
- Market fragility (1)
- Mitigation (1)
- Money Market (1)
- Mortgages (1)
- Mundellian trilemma (1)
- Mutually exciting processes (1)
- NLP (1)
- Network theory (1)
- OTC Markets (1)
- OTC derivatives (1)
- OTC-Märkte (1)
- Opening Auction (1)
- Opening Call Auction (1)
- P2P lending (1)
- Policy measures in the EU (1)
- Portfolio Management (1)
- Portfolio choice (1)
- Pre-Opening (1)
- Proprietary Trading (1)
- Public financial news (1)
- Quantitative Easing (1)
- Quantitative easing (1)
- Repo Specialness (1)
- Retail Challenge (1)
- Risk Pooling (1)
- Risk sharing (1)
- Russian Sanction (1)
- S&P 500 (1)
- SFDR (1)
- SIFI (1)
- SWIFT (1)
- Search Frictions (1)
- Secondary Loan Markets (1)
- Securitisation (1)
- Securitization (1)
- Sentiment Analysis (1)
- Sentiment analysis (1)
- Sicherheitenmarge (1)
- Similarity (1)
- Slow-Moving Capital (1)
- Slow-moving capital (1)
- Social media (1)
- Socially responsible investing (1)
- Sovereign (1)
- Sovereign CDS (1)
- Sovereign credit risk (1)
- Sovereign risk (1)
- Stock Markets (1)
- Stock market (1)
- Stock markets (1)
- Supervisory Achitecture (1)
- Sustainabilty (1)
- Systematisches Risiko (1)
- Systemic risk (1)
- TARP (1)
- Taxonomie (1)
- Term Structure of Interest Rates (1)
- Transparency (1)
- Twitter (1)
- Unconventional Monetary policy (1)
- Venue Choice (1)
- Verlustbeteiligung (1)
- Wirecard (1)
- WpHG (1)
- Zentrales Clearing (1)
- asset-backed securities (1)
- assetbacked securities (1)
- bank lending (1)
- central counterparties (1)
- conventional monetary policy (1)
- credit risk (1)
- debt cost (1)
- derivatives (1)
- distress (1)
- equity (1)
- equity cost (1)
- event study (1)
- financial market data (1)
- financial market regulation (1)
- financial market supervision (1)
- flash crashes (1)
- fragmentation (1)
- hedging (1)
- high-frequency data (1)
- high-frequency traders (HFTs) (1)
- insurance industry (1)
- interconnections (1)
- interest rate risk (1)
- liquidity (1)
- liquidity provision (1)
- losses (1)
- market making (1)
- micro data transparency (1)
- monetary policy surprise (1)
- network (1)
- network analysis (1)
- pandemics (1)
- policy measures in the EU (1)
- portfolio management (1)
- recapitalization (1)
- resiliency (1)
- risk management (1)
- risk sharing (1)
- sovereign bonds (1)
- strategies (1)
- sustainable investments (1)
- systematic risk (1)
- systemic risk (1)
- unconventional monetary policy (1)
- volatility (1)
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.
An important assumption underlying the designation of some insurers as systemically important is that their overlapping portfolio holdings can result in common selling. We measure the overlap in holdings using cosine similarity, and show that insurers with more similar portfolios have larger subsequent common sales. This relationship can be magnified for some insurers when they are regulatory capital constrained or markets are under stress. When faced with an exogenous liquidity shock, insurers with greater portfolio similarity have even larger common sales that impact prices. Our measure can be used by regulators to predict which institutions may contribute most to financial instability through the asset liquidation channel of risk transmission.
We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample’s employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.
(JEL G01, G32, G33)
This Policy Letter presents a proposal for designing a program of government assistance for firms hurt by the Coronavirus crisis in the European Union (EU). In our recent Policy Letter 81, we introduced a new, equity-type instrument, a cash-against-tax surcharge scheme, bundled across firms and countries in a European Pandemic Equity Fund (EPEF). The present Policy Letter 84 focuses on the principles and conditions relevant for the operationalization of a EPEF. Our proposal has several desirable features. It: a) offers better risk sharing opportunities, augmenting the resilience of businesses and EU economies; b) is need-based, thereby contributing to an effective use of resources; c) builds on conditions and credible controls, addressing adverse selection and moral hazard; d) is accessible to smaller and medium-sized firms, the backbone of Europe’s economy; e) applies Europe-wide uniform eligibility criteria, strengthening support among member states; f) is a scheme of limited duration, reducing (perceived) government interference in businesses; g) creates a template for a growth-oriented public policy, aligning public and private sector interests; and h) builds on the existing institutional infrastructure and requires minimal legislative adjustments.
This policy letter adds to the current discussion on how to design a program of government assistance for firms hurt by the Coronavirus crisis. While not pretending to provide a cure-all proposal, the advocated scheme could help to bring funding to firms, even small firms, quickly, without increasing their leverage and default risk. The plan combines outright cash transfers to firms with a temporary, elevated corporate profit tax at the firm level as a form of conditional payback. The implied equity-like payment structure has positive risk-sharing features for firms, without impinging on ownership structures. The proposal has to be implemented at the pan-European level to strengthen Euro area resilience.
The spreading of the Covid-19 virus causes a reduction in economic activity worldwide and may lead to new risks to financial stability. The authors draw attention to the urgency of the targeted mitigation strategies on the European level and suggest taking coordinated action on the fiscal side to provide liquidity to affected firms in the corporate sector. Otherwise, virus-related cashflow interruptions could lead to a new full-blown banking crisis. Monetary policy measures are unlikely to mitigate cash liquidity shortages at the level of individual firms. Coordinated action at European level is decisive to prevent markets from losing confidence in the resilience of banks, particularly in countries with limited fiscal capacity. In contrast to the euro crisis of 2011, the cause of the current crisis does not lie in the financial markets; therefore, the risk of moral hazard for banks or states is low.
The salience of ESG ratings for stock pricing: evidence from (potentially) confused investors
(2021)
We exploit the a modification to Sustainanlytics’ environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some investors to make incorrect assessments about the meaning of the change in ESG ratings. They buy (sell) stocks they misconceive as ESG upgraded (downgraded) even when the opposite is true. This trading behavior exerts transitory price pressure on affected stocks. Our paper highlights the importance of ESG ratings for investors and consequently for asset prices.