Contagion Phenomena with Applications in Finance - 1st Edition - ISBN: 9781785480355, 9780081004784

Contagion Phenomena with Applications in Finance

1st Edition

Authors: Serge Darolles Christian Gourieroux
eBook ISBN: 9780081004784
Hardcover ISBN: 9781785480355
Imprint: ISTE Press - Elsevier
Published Date: 19th August 2015
Page Count: 166
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Description

Much research into financial contagion and systematic risks has been motivated by the finding that cross-market correlations (resp. coexceedances) between asset returns increase significantly during crisis periods. Is this increase due to an exogenous shock common to all markets (interdependence) or due to certain types of transmission of shocks between markets (contagion)?

Darolles and Gourieroux explain that an attempt to convey contagion and causality in a static framework can be flawed due to identification problems; they provide a more precise definition of the notion of shock to strengthen the solution within a dynamic framework.

This book covers the standard practice for defining shocks in SVAR models, impulse response functions, identitification issues, static and dynamic models, leading to the challenges of measurement of systematic risk and contagion, with interpretations of hedge fund survival and market liquidity risks

Key Features

  • Features the standard practice of defining shocks to models to help you to define impulse response and dynamic consequences
  • Shows that identification of shocks can be solved in a dynamic framework, even within a linear perspective
  • Helps you to apply the models to portfolio management, risk monitoring, and the analysis of financial stability

Readership

Upper-division undergraduates, graduate students, and researchers working on market linkages, pricing and risk management in financial markets and industries.

Table of Contents

  • Introduction
  • 1. Contagion and Causality in Static Models
    • Abstract
    • 1.1 Linear dependence in a static model
    • 1.2 Nonlinear dependence in a static model
    • 1.3 Model with exogenous switching regimes
    • 1.4 Chapter 1 highlights
    • 1.5 Appendices
  • 2. Contagion in Structural VARMA Models
    • Abstract
    • 2.1 Shocks in a dynamic model
    • 2.2 A vector autoregressive moving average (VARMA) model with independent errors
    • 2.3 Non-fundamentalness
    • 2.4 Chapter 2 highlights
    • 2.5 Appendices
  • 3. Common Frailty versus Contagion in Linear Dynamic Models
    • Abstract
    • 3.1 Linear dynamic model with common factor and contagion
    • 3.2 Observable versus latent factors
    • 3.3 Shocks, impulse response functions and stress
    • 3.4 Constrained models and misspecification
    • 3.5 The literature
    • 3.6 Chapter 3 highlights
    • 3.7 Appendices
  • 4. Applications of Linear Dynamic Models
    • Abstract
    • 4.1 Portfolio management
    • 4.2 Contagion among banks
    • 4.3 Chapter 4 highlights
    • 4.4 Appendices
  • 5. Common Frailty and Contagion in Nonlinear Dynamic Models
    • Abstract
    • 5.1 Specifications
    • 5.2 Stochastic volatility model
    • 5.3 Application to portfolio management
    • 5.4 Chapter 5 highlights
    • 5.5 Appendices
  • 6. An Application of Nonlinear Dynamic Models: The Hedge Fund Survival
    • Abstract
    • 6.1 HF liquidation data
    • 6.2 Dynamic Poisson model
    • 6.3 Results
    • 6.4 Stress-tests
    • 6.5 Chapter 6 highlights
    • 6.6 Appendices
  • Bibliography
  • Index

Details

No. of pages:
166
Language:
English
Copyright:
© ISTE Press - Elsevier 2015
Published:
Imprint:
ISTE Press - Elsevier
eBook ISBN:
9780081004784
Hardcover ISBN:
9781785480355

About the Author

Serge Darolles

Serge Darolles is Professor of Finance at Paris–Dauphine University in France, and member of the Quantitative Management Initiative (QMI) scientific committee. His research interests include financial econometrics, liquidity and hedge fund analysis. He has written numerous articles, which have been published in academic journals.

Affiliations and Expertise

Professor of Finance, Paris–Dauphine University, France

Christian Gourieroux

Christian Gourieroux is Professor at the University of Toronto in Canada, and Chair of the Finance Laboratory at the Center for Research in Economics and Statistics (CREST) in Paris.

Affiliations and Expertise

Professor, Dept of Economics, University of Toronto, Canada