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sākt mācīties
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Possibility that at least several banks will collapse, Situation in which default of one participant of financial system causes defaults of other participants, which leads to chain effect causing financial troubles
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What is financial crisis? sākt mācīties
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State of disequilibrium in financial market characterized by lack of liquidity
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What is financial stability? sākt mācīties
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Lack of financial crisis, State in which financial system fulfills all its functions in continuous and effective way, also in the case of unexpected and negative shocks at large scale, Ability to support economic processes, risk management and shock absorption.
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What is expected shortfall? sākt mācīties
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Present Value of the part of debt which is not backed by assets in the case of default
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What measures of risk of banking sector depend on? sākt mācīties
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-Capitalization of bank –the higher, the lower risk, Volatility of assets –the higher, the higher risk, Correlation of assets –the higher, the higher risk
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What are the measures of risk in banking sector? sākt mācīties
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probability that group of banks will collapse, probability that fraction of the banks will collapse, expected shortfall
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What are characteristics of price stability? sākt mācīties
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simple administrative procedure, standard forecasts, accountable, instruments of control, measurable
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What are characteristics of financial stability? sākt mācīties
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hardly measurable, not accountable, forecasted by stress tests and simulations, difficult administrative procedure
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Why measure financial stability? sākt mācīties
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1. It is easier to define, measure, model, analyse etc 2. problem of measurement should have priority as we need to compare and analyse 3. we need a formal, model-based definition
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How financial fragility is characterised? sākt mācīties
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It is characterised by reduced bank profitability and increased aggregate default.
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what bank profitability and increased aggregate default is linked to? sākt mācīties
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sākt mācīties
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measure reflecting changes of some index in the specified period, for example: stock prices, market index values, interest rates, exchange rates, commodity prices, etc.
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What usually is taken for a measure of volatility? sākt mācīties
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standard deviation of returns
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What is historical volatility? sākt mācīties
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volatility determined on the basis of historical data
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What is implied volatility? sākt mācīties
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volatility determined from option prices
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What is forecasted volatility? sākt mācīties
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volatility for future period
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What is Realized volatility? sākt mācīties
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volatility of past period
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What volatility is related to? sākt mācīties
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to particular period, for example daily, monthly annual. This allows us to determine term structure of volatility –for each time period volatility is determined
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What is volatility clustering? sākt mācīties
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large changes are followed by large changes, small changes are followed by small changes
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Name some volatility properties? sākt mācīties
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Volatility is mean reverting, Positive and negative shocks have asymmetric impact on volatility, Price changes and volatility are negatively correlated, Changes of volatility on the different markets are positively correlated
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What are the two groups of historical volatility models? sākt mācīties
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Simple estimators, Estimators in financial econometrics models
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What Estimator of Anderson is? sākt mācīties
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o called integrated volatility –sum of logarithmic returns determined for short intraday intervals, Considered as a benchmark for simple volatility estimators
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What is EWMA (Exponentially Weighted Moving Average)? sākt mācīties
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JP Morgan in Riskmetrics Estimated sequentially as weighted average of previous variance and current squared deviation from mean
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sākt mācīties
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Generalized AutoRegressive Conditional Heteroscedasticity
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sākt mācīties
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This is monthly volatility, calculated by using prices of options on S&P 500, with different strikes.
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sākt mācīties
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Name some volatility indices? sākt mācīties
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VXN (NASDAQ 100), VXD (DJIA), RVX (Russell 2000)
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