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Research
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Working Papers
Working Papers
CVaR in G-VAR : Financial Markets Vulnerabilities and Left-Tail Risk Spillovers
CVaR in G-VAR : Financial Markets Vulnerabilities and Left-Tail Risk Spillovers
Abstract: This paper proposes an empirical framework to assess the ad-hoc tail risk connectedness across financial markets. I discuss the role of systemic risk as a predictor of financial tail risks in the quantile regression framework introduced in Adrian et al. (2019). I independently estimate the expected shortfall, also called conditional value-at-risk (CVaR), for four asset classes. Surprisingly, systemic stress has little informational power over future tail outcomes in those asset classes, even if the overall picture is not homogeneous across markets. The CVaR measures constructed as the tails of predictive conditional distributions are then taken to a generalized vector autoregression (G-VAR) framework in which forecast-error variance decompositions are invariant to the variable ordering as in Diebold & Yilmaz (2012) to build a directional left-tail risk spillovers measure. I find strong evidence of high dependence between the tails of the distributions across financial markets with risks of contagion during episodes of high volatility.
Presented at: The 6th QFFE (Quantitative Finance and Financial Econometrics) International Conference 2024 - at AMSE (Aix-Marseille School of Economics)
Predictive Distribution of Asset Returns over Time
Policy Publication
Policy Publication
Work in Progress
Work in Progress
Granular Bank Shocks and Financial Intermediation in a Low-Income Economy (with F. Fischer & O. Ozlu)
Granular Bank Shocks and Financial Intermediation in a Low-Income Economy (with F. Fischer & O. Ozlu)
Abstract: This paper investigates the granular dynamics of the Mauritanian banking sector by examining the impact of idiosyncratic bank shocks on aggregate financial intermediation. Using confidential bank-level data, we construct granular instruments based on shocks to lending growth and profitability, derived from first-stage regressions that control for macroeconomic conditions and bank-specific characteristics. In the second stage, we show that granular shocks to lending growth explain between 42 and 50 percent of the variation in aggregate lending growth, while granular shocks to profitability account for 22 percent of the fluctuations in private sector credit-to-GDP growth. Our results suggest that a small number of large banks dominate the financial intermediation process in Mauritania, highlighting a mismatch between profitability and the provision of financial services.
Presented at: International Monetary Fund (IMF) Brown Bag Presentation
EADG (Efficiency–Access and Depth Gap) for Selected Regions
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