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Effect of regulation on OTC derivatives in G-SIBS in the USA in 2010-2015
Zajíčková, Tereza ; Jílek, Josef (advisor) ; Munzi, Tomáš (referee)
Institutions from the G-SIBs category have been under greater scrutiny not just by regulatory authorities since the beginning of the financial crisis in 2008. Insufficient regulation in OTC derivatives combined with moral hazard expressed in the highly speculative behaviour by G-SIBs were major factors contributing to the development of the financial crisis. The regulatory bodies in the USA responded to the situation by adopting the Dodd-Frank ACT with the aim to introduce additional rules for the market with OTC derivatives and regulate the activities of G-SIBs significantly. The paper analyses selected indicators related to the OTC derivative exposure and the overall financial condition of the selected G-SIBs. The thesis analyses the development of the monitored indicators following the implementation of the DFA to confirm that the risk arising from speculative derivative deals by G-SIBs was reduced, the financial condition of the selected institutions was strengthened, and the systemic risk was thus suppressed during the period 2010-2015.
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Changes in providing mortgage loans and their impact on financial stability
Fiala, Lukáš ; Cibulka, Jakub (advisor) ; Rajl, Jiří (referee)
This bachelor thesis deals with mortgage loans and risks of these instruments for financial stability. In the first part are defined mortgage loans and there is showed current situation on mortgage market. The second part explains systemic risk and financial stability. There is also analysed present Czech national bank´s policy in mortgage loans sphere and a new law. The last part contains research of factors which affect providing mortgages and estimation of final impact on financial stability. The conclusion summarizes obtained knowledge and tries to predict future state on mortgage market and real estate market.
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European Union approach to stress testing of banks
Likovská, Veronika ; Blahová, Naďa (advisor) ; Šíma, Ondřej (referee)
The diploma thesis deals with stress testing as a specific tool which is used by European Banking Association for banking sector financial stability assessment. The main aim is to provide reader with analysis of EBA stress testing. Both the EBA methodology and 2016 results are analyzed in second part. Due to high costs spend on stress testing process I consider practical usage from the bank point of view as very important. This issue is discussed in fourth part of this thesis.
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Multi-agent Network Models of Financial Stability
Klinger, Tomáš ; Teplý, Petr (advisor) ; Tripe, David (referee) ; Stavárek, Daniel (referee) ; Jakubík, Petr (referee)
The thesis focuses on banking regulation and on the nexus between financial sovereign crises. After illustrating the main mechanisms on the recent financial crisis, we construct several multi-agent network models of a financial system for testing its stability under different parameters. In the first part, we focus on the rationale for banking regulation and we describe its development including the recently introduced Basel III measures. The main conclusion of this part is that regulation is to a large extent influenced by the banks and it does not always secure financial system stability. In the second part, we build an agent-based model which enables us to simulate the impacts of various types of negative shocks given various settings of the banking system and the regulatory environment, including the capital and liquidity measures. Our simulations show firstly that sufficient capital buffers are crucial for systemic stability, secondly that the discretionary measures have little effect once a crisis breaks out and thirdly that liquidity measures are a relevant regulatory tool. In the third part, the model is extended so that it allows for testing effects of state support on systemic stability is tested with various parameter settings in Monte Carlo simulations and for testing of feedback loops in which...
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Measuring systemic risk in time-frequency domain
Muzikářová, Ivana ; Baruník, Jozef (advisor) ; Bauer, Michal (referee)
This thesis provides an analysis of systemic risk in the US banking sector. We use conditional value at risk (∆CoVaR), marginal expected shortfall (MES) and cross-quantilogram (CQ) to statistically measure tail-dependence in return series of individual institutions and the system as a whole. Wavelet multireso- lution analysis is used to study systemic risk in the time-frequency domain. De- composition of returns on different scales allows us to isolate cycles of 2-8 days, 8-32 days and 32-64 days and analyze co-movement patterns which would oth- erwise stay hidden. Empirical results demonstrate that filtering out short-term noise from the return series improves the forecast power of ∆CoVaR. Eventu- ally, we investigate the connection between statistical measures of systemic risk and fundamental characteristics of institutions (size, leverage, market to book ratio) and conclude that size is the most robust determinant of systemic risk.
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Systemic Risk in the European Financial and Energy Sector: Dynamic Factor Copula Approach
Nevrla, Matěj ; Baruník, Jozef (advisor) ; Buzková, Petra (referee)
In the thesis we perform analysis of systemic risk in the financial and energy sector in Europe. As the econometric tool for estimating dependencies across the subjects we employ factor copula model with GAS dynamics of Oh & Patton (2013b). We apply this model to daily CDS spreads. Based on the estimated results we perform Monte Carlo simulations in order to obtain future values of CDS spreads and measure probability of systemic events. We conclude that substantially higher systemic risk is present within the financial sector. We also find that the most systemic companies from both sectors come from Spain. JEL Classification C53, C55, C58, G17 Keywords Credit Default Swap, Energy Sector, Factor Copula, Financial Sector, Generalized Autore- gressive Score Model, Systemic Risk Author's e-mail matej.nevrla@gmail.com Supervisor's e-mail barunik@fsv.cuni.cz
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Four Essays on Financial Stability
Jakubík, Petr ; Dědek, Oldřich (advisor) ; Mejstřík, Michal (referee) ; Kodera, Jan (referee) ; Peltonen, Tuomas (referee)
Recent episodes of financial instability have motivated researchers as well as policy makers to intensify research on financial stability. This thesis contributes to current research and policy discussion by elaborating and empirically testing methodologies, which can be used to measure financial sector vulnerabilities and identify potential risks for financial stability. It further focuses on the link between real and the financial sector as well as possible implications of household financial distress on the aggregate economy. Together with the proposed framework we provide the survey of the current literature on these topics as well as the empirical results. We argue in favour of stress testing methodologies covering the key risks on banks' balance sheets. These frameworks can also be used for emerging markets where data availability is typically limited. It is shown that due to high volatility of credit growth in emerging economies, the static approach assuming constant balance sheet items is not very appropriate. Furthermore, the feedback effect between the financial sector and the real economy might play an important role under certain assumptions, and therefore it should be taken into account by policy makers. This effect can also emerge in the real sector itself as potential instability can...
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Inter-sector credit exposure: Contingent claims analysis in the Czech Republic
Brechler, Josef ; Hlaváček, Michal (advisor) ; Janda, Karel (referee)
Linkages between economic agents in form of financial assets might contribute to transmission of shocks between different parts of the economy. Aim of this thesis is to enrich the ongoing discussion about the spread of contagion through the economy. We provide an analysis of financial interlinkages in the Czech economy and using the contingent claims analysis (CCA) model we attempt to quantify risks in the system that that are implied by the existence of these linkages. We use different techniques within the framework of the model to obtain various indicators that can be used to assess stability of the system. Using simulations we find that size of losses due to riskiness of debt depends strongly on the origin of a shock and it is higher for shocks originating in the household sector than for shocks originating in the sector of the non-financial corporations. We also find that size of a decrease in capital of the banking sector needed to cause a distress in the system as relatively high and stable in time. JEL Classification E01, E44, G01, G12, G20 Keywords Balance sheet contagion, financial accounts, network models, contingent claims analysis, systemic risk Author's e-mail josef.brechler@gmail.com Supervisor's e-mail michal.hlavacek@cnb.cz
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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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