It does so by introducing a new metric to quantify carbon-related concentration risk in banks’ corporate loan portfolios. Using data on individual borrowers’ emissions, the formula of the Herfindahl-Hirschman Index (HHI) is extended to create a carbon-weighted HHI (cwHHI). The cwHHI reveals substantial heterogeneity in the degree of carbon-related concentration among portfolios similarly exposed to high-emitting firms.
This box constructs an indicator of such divergent dynamics for euro area bond markets, assesses the resilience of bond markets under different regimes of this indicator and discusses financial stability risks associated with financial fragmentation. JEL CodeG01: Financial Economics→General→Financial CrisesG15: Financial Economics→General Financial Markets→International Financial MarketsF15: International Economics→Trade→Economic IntegrationF65: International Economics→Economic Impacts of Globalization→FinanceG12: Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates16 November 2022FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2022AbstractInterest rate swaps account for the largest share of the euro area derivatives market.
This mismatch arises if funds primarily invest in less liquid assets while at the same time offering their investors the option of short-term redemptions. In 2017 the Financial Stability Board (FSB) published policy recommendations to address structural vulnerabilities related to asset management activities, including liquidity mismatch. Our results suggest that the liquidity mismatch increased in the years up to the pandemic.
In the most recent publication, we argued that higher than expected inflation can increase this risk and provide some arguments to substantiate this claim. However, with the inflation remaining a key topic, our “warning” needs to be better substantiated and more specific. The analytics in the box do exactly this. In both 2021 2022, the 12-month correlation between daily US bond and stock returns has crossed into positive territory. The assumption of having a low correlation between stock and bond returns has historically been one of the bedrocks of strategic asset allocation (e.
At an aggregate level the DI shows superior forecasting power compared to the EDF, for horizons between 3 and 12 months. We illustrate the predictive power of the DI measure for the aggregate default rate by examining how corporate defaults would have evolved during the period marked by the spreading of the COVID-19 pandemic if DIs had not increased (so making future defaults less likely) also owing to the Eurosystem’s Public Emergency Purchase Program (PEPP).
¿Cuándo y dónde es el Selección España Sub-21 vs. Japón Sub-21? PARTIDOEspaña Sub-21 vs. Japón Sub-21FECHA Viernes, 18 de noviembreESTADIOLa Cartuja (Sevilla)HORARIO 20:00Dónde ver en directo online Selección España Sub-21 vs. Japón Sub-21, amistoso de selecciones en 2022: Canal de TV y StreamingZONA CANAL HORARIO EspañaTeledeporte rtve. es 20:00SudaméricaTeledeporte ARG: 16:00 CHI: 16:00, COL: 14:00MéxicoTeledeporte MEX: 13:00El partido entre España Sub-21 y Japón Sub-21 se podrá seguir los canales de TVE, concretamente en su canal de deportes Teledeporte. La cadena de televisión pública emitirá el choque, que se verá sin problemas a través de cualquier dispositivo o televisión.
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The significant volatility and skyrocketing prices seen in energy markets since March 2022 have resulted in large margin calls, generating liquidity risks for derivatives users. Strategies employed by companies to alleviate liquidity stress may lead to an accumulation of credit risk for their lenders or their counterparties in less collateralised segments of the derivatives market. Further price increases would accentuate nascent vulnerabilities, creating additional stress in a concentrated market. These issues underline the need to review margining practices and enhance the liquidity preparedness of all market participants to deal with large margin calls.
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2749AbstractWe test whether a simple measure of corporate insolvency based on equity return volatility -and denoted as Distance to Insolvency (DI) - delivers better prediction of corporate defaults than the widely-used Expected Default Frequency (EDF) measure computed by Moody’s. We look at the predictive power that current DIs and EDFs have for future defaults, both at a firm-level and at an aggregate level. At the granular level, both DIs and EDFs anticipate corporate defaults, but the DI contains information over and above the EDF, especially at longer forecasting horizons.
In the four years after a negative economic shock, the cumulative loss of capital of high-debt firms is around 15% higher than that of firms with lower debt burdens. The negative impact of high debt on investment is most evident for firms in Southern and Eastern Europe and for micro firms. These findings suggest a potentially significant negative impact of increased corporate indebtedness on investment in the post-COVID-19 recovery. JEL CodeE22: Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, CapacityF34: International Economics→International Finance→International Lending and Debt ProblemsG31: Financial Economics→Corporate Finance and Governance→Capital Budgeting, Fixed Investment and Inventory Studies, CapacityG32: Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill16 November 2022OCCASIONAL PAPER SERIES - No.