Dear colleague,

The next research seminar, which you are invited to attend, will take place on 11th of June, 11h30, Américo Amorim Building (Room 4), and will be presented by Abhinav Anand, on the topic “Foster-Hart Risk and the Too-Big-to-Fail Banks: An Empirical Investigation”.

Abhinav Anand (a), Tiantian Liy (b), Tetsuo Kurosakiz (c), Young Shin Kimx (b)
(a) University College Dublin
(b) SUNY at Stony Brook
(c) Bank of Japan


Abstract

The measurement of financial risk relies on two factors: determination of riskiness by use of an appropriate risk measure; and the distribution according to which returns are governed. Wrong estimates of either, severely compromise the accuracy of computed risk. We identify the too-big-to-fail banks with the set of “Global Systemically Important Banks" (G-SIBs) and analyze the equity risk of its equally weighted portfolio by means of the \Foster-Hart risk measure" | a new, reserve based measure of risk, extremely sensitive to tail events. We model banks' stock returns as an ARMA-GARCH process with multivariate “Normal Tempered Stable" innovations, to capture the skewed and leptokurtotic nature of stock returns. Our union of the Foster-Hart risk modeling with fat-tailed statistical modeling bears fruit, as we are able to measure the equity risk posed by the G-SIBs more accurately than is possible with current techniques.

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Please confirm your attendance until June 10th by e-mailing Mara Carvalho (macarvalho@porto.ucp.pt)

 
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