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Contagion Phenomena with Applications in Finance
1st Edition - August 19, 2015
Authors: Serge Darolles, Christian Gourieroux
Hardback ISBN:9781785480355
9 7 8 - 1 - 7 8 5 4 8 - 0 3 5 - 5
eBook ISBN:9780081004784
9 7 8 - 0 - 0 8 - 1 0 0 4 7 8 - 4
Much research into financial contagion and systematic risks has been motivated by the finding that cross-market correlations (resp. coexceedances) between asset returns increase… Read more
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Much research into financial contagion and systematic risks has been motivated by the finding that cross-market correlations (resp. coexceedances) between asset returns increase significantly during crisis periods. Is this increase due to an exogenous shock common to all markets (interdependence) or due to certain types of transmission of shocks between markets (contagion)? Darolles and Gourieroux explain that an attempt to convey contagion and causality in a static framework can be flawed due to identification problems; they provide a more precise definition of the notion of shock to strengthen the solution within a dynamic framework.This book covers the standard practice for defining shocks in SVAR models, impulse response functions, identitification issues, static and dynamic models, leading to the challenges of measurement of systematic risk and contagion, with interpretations of hedge fund survival and market liquidity risks
Features the standard practice of defining shocks to models to help you to define impulse response and dynamic consequences
Shows that identification of shocks can be solved in a dynamic framework, even within a linear perspective
Helps you to apply the models to portfolio management, risk monitoring, and the analysis of financial stability
Upper-division undergraduates, graduate students, and researchers working on market linkages, pricing and risk management in financial markets and industries.
Introduction
1. Contagion and Causality in Static Models
Abstract
1.1 Linear dependence in a static model
1.2 Nonlinear dependence in a static model
1.3 Model with exogenous switching regimes
1.4 Chapter 1 highlights
1.5 Appendices
2. Contagion in Structural VARMA Models
Abstract
2.1 Shocks in a dynamic model
2.2 A vector autoregressive moving average (VARMA) model with independent errors
2.3 Non-fundamentalness
2.4 Chapter 2 highlights
2.5 Appendices
3. Common Frailty versus Contagion in Linear Dynamic Models
Abstract
3.1 Linear dynamic model with common factor and contagion
3.2 Observable versus latent factors
3.3 Shocks, impulse response functions and stress
3.4 Constrained models and misspecification
3.5 The literature
3.6 Chapter 3 highlights
3.7 Appendices
4. Applications of Linear Dynamic Models
Abstract
4.1 Portfolio management
4.2 Contagion among banks
4.3 Chapter 4 highlights
4.4 Appendices
5. Common Frailty and Contagion in Nonlinear Dynamic Models
Abstract
5.1 Specifications
5.2 Stochastic volatility model
5.3 Application to portfolio management
5.4 Chapter 5 highlights
5.5 Appendices
6. An Application of Nonlinear Dynamic Models: The Hedge Fund Survival
Abstract
6.1 HF liquidation data
6.2 Dynamic Poisson model
6.3 Results
6.4 Stress-tests
6.5 Chapter 6 highlights
6.6 Appendices
Bibliography
Index
No. of pages: 166
Language: English
Published: August 19, 2015
Imprint: ISTE Press - Elsevier
Hardback ISBN: 9781785480355
eBook ISBN: 9780081004784
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Serge Darolles
Serge Darolles is Professor of Finance at Paris–Dauphine University in France, and member of the Quantitative Management Initiative (QMI) scientific committee. His research interests include financial econometrics, liquidity and hedge fund analysis. He has written numerous articles, which have been published in academic journals.
Affiliations and expertise
Professor of Finance, Paris–Dauphine University, France
CG
Christian Gourieroux
Christian Gourieroux is Professor at the University of Toronto in Canada, and Chair of the Finance Laboratory at the Center for Research in Economics and Statistics (CREST) in Paris.
Affiliations and expertise
Professor, Dept of Economics, University of Toronto, Canada