Now showing 1 - 2 of 2
  • Publication
    Spillover Effects among Financial Institutions: A State-Dependent Sensitivity Value-at-Risk Approach
    (Cambridge University Press, 2014-05-30) ; ;
    Gropp, Reint
    In this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). Within a system of quantile regressions for four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions. Using daily data, we can trace out the spillover effects over time in a set of impulse response functions and find that they reach their peak after 10 to 15 days.
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    Scopus© Citations 69
  • Publication
    Value at Risk, GARCH Modelling and the Forecasting of Hedge Fund Return Volatility
    (Palgrave Macmillan, 2007-05-10) ;
    Kaiser, Dieter K.
    ;
    This paper examines the conditional volatility characteristics of daily management style returns and compares the out-of-sample forecasts of different Value at Risk (VaR) approaches, namely, the normal, Cornish-Fisher (CF), and the so-called GARCH-type VaR. The examination of the conditional volatility of hedge fund styles and composite returns shows important differences concerning persistence, mean reversion and asymmetry in the period under consideration. Hedge fund returns exhibit significant negative skewness and excess kurtosis, which cannot be captured in the normal VaR whereas the CF-VaR results in a systematic downward shift of the conventional VaR. The GARCH-type VaR, however, includes the time-varying conditional volatility and is able to trace the actual return process more effectively. Since the forecast performance cannot detect which of the three VaR types can match the time-varying risk adequately, an adjusted hit ratio takes the size of the hits as well as the average VaR into account. According to this, the GARCH-type VaR outperforms the other VaRs for most of the hedge fund style indices.
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