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What and Who
Title:Foster-Hart Risk and the Too-Big-to-Fail Banks: An Empirical Investigation
Speaker:Abhinav Anand
coming from:Max-Planck-Institut für Informatik - D1
Speakers Bio:
Event Type:AG1 Mittagsseminar (own work)
Visibility:D1, D2, D3, D4, D5, RG1, SWS, MMCI
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Level:AG Audience
Language:English
Date, Time and Location
Date:Tuesday, 7 April 2015
Time:13:00
Duration:30 Minutes
Location:Saarbrücken
Building:E1 4
Room:024
Abstract
The measurement of financial risk relies on two factors: determination of riskiness by use of an appropriate risk measure; and the distribution according to which returns are governed. Wrong estimates of either, severely compromise the accuracy of computed risk. We identify the too-big-to-fail banks with the set of “Global Systemically Important Banks” (G-SIBs) and analyze the equity risk of its equally weighted portfolio by means of the “Foster-Hart risk measure” — a new, reserve based measure of risk, extremely sensitive to tail

events. We model banks’ stock returns as an ARMA-GARCH process with multivariate “Normal Tempered Stable” innovations, to capture the skewed and leptokurtotic nature of stock returns. Our union of the Foster-Hart risk modeling with fat-tailed statistical modeling bears fruit, as we are able to measure the equity risk posed by the G-SIBs more accurately than is possible with current techniques.

Contact
Name(s):Mayank Goswami
Video Broadcast
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Created by:Mayank Goswami, 02/25/2015 11:38 PMLast modified by:Uwe Brahm/MPII/DE, 11/24/2016 04:13 PM
  • Mayank Goswami, 02/25/2015 11:38 PM
  • Mayank Goswami, 02/25/2015 11:38 PM -- Created document.