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Comovement of Central European stock markets using wavelet coherence: Evidence from high-frequency data
Baruník, Jozef ; Vácha, Lukáš ; Krištoufek, Ladislav
In this paper, we contribute to the literature on international stock market comovement and contagion. The novelty of our approach lies in usage of wavelet tools to high-frequency financial market data, which allows us to understand the relationship between stock market returns in completely different way. Major part of economic time series analysis is done in time or frequency domain separately. Wavelet analysis can combine these two funda- mental approaches, so we can work in time-frequency domain. Using wavelet coherence, we have found very interesting dynamics of cross-correlations be- tween Central European and Western European stock markets. We analyze the high-frequency (5 minute) and low-frequency (daily) data of Czech (PX), Hungarian (BUX) and Polish (WIG) stock indices with a benchmark of German stock index (DAX) on the period of 2008-2009. Our findings provide possibility of a new approach to financial risk modeling.
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Modeling a distribution of mortgage credit losses
Gapko, Petr ; Šmíd, Martin
One of the biggest risks arising from financial operations is the risk of counterparty default, commonly known as a “credit risk”. Leaving unmanaged, the credit risk would, with a high probability, result in a crash of a bank. In our paper, we will focus on the credit risk quantification methodology. We will demonstrate that the current regulatory standards for credit risk management are at least not perfect, despite the fact that the regulatory framework for credit risk measurement is more developed than systems for measuring other risks, e.g. market risks or operational risk. Generalizing the well known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the common factor, influencing the borrowers’ assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage deliquency rates.
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Multifractal height cross-correlation analysis
Krištoufek, Ladislav
We introduce a new method for detection of long-range cross-correlations and cross-multifractality – multifractal height cross-correlation analysis (MF-HXA). We show that long-range cross-correlations can be caused by long-range dependence of separate processes and the correlations above them. Similar separation applies for cross-multifractality – standard sep- aration between distributional properties and correlations is enriched by division of correlations between auto-correlations and cross-correlations. Efficiency of the method is showed on two types of simulated series – ARFIMA and Mandelbrot’s Binomial Multifractal model. We further ap- ply the method on returns and volatility of NASDAQ and S&P500 indices and uncover some interesting results.
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Stochastická teorie katastrof
Vošvrda, Miloslav ; Voříšek, Jan
The so called Cusp deterministic catastrophe model extends the classical linear regression adding nonlinearity into a model. A property of a stochatic catastrophe model connected with stochastic differential equation could be described by density, which is known in closed-form only in stationary case. The approximation of the transition density is done here by finite difference metod.
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