scholarly journals Can Forecast Errors Predict Financial Crises? Exploring the Properties of a New Multivariate Credit Gap

2020 ◽  
Vol 2020 (045) ◽  
Author(s):  
Elena Afanasyeva ◽  
Keyword(s):  
Financial Crises ◽  
Forecast Errors ◽  
Credit Gap

Nonlinear Adjustments of Volatility Expectations to Forecast Errors: Evidence from Markov-Regime Switches in Implied Volatility

2012 ◽  
Vol 15 (03) ◽  
pp. 1250007 ◽  
Author(s):  
Kazuhiko Nishina ◽  
Nabil Maghrebi ◽  
Mark J. Holmes
Keyword(s):  
Financial Crises ◽  
Regime Switching ◽  
Serial Correlation ◽  
Implied Volatility ◽  
Nonlinear Behavior ◽  
Heterogeneous Beliefs ◽  
Forecast Errors ◽  
Market Participants ◽  
Model Free ◽  
Switching Models

This paper tests for nonlinearities in the behavior of volatility expectations based on model-free implied volatility indices. Using Markov regime-switching models, the empirical evidence from the German, Japanese and U.S. markets suggests that there are indeed regime-specific levels of volatility expectations. Whereas the regimes seem to be governed by the degree of serial correlation and adjustment to forecast errors, there is no evidence of significant leverage effects. The frequency of regime shifts in volatility expectations is affected by the onset of financial crises, which have the effect of increasing the likelihood of regimes driven by lower autoregressive effects and faster speeds of adjustment. The evidence suggests that despite the heterogeneous beliefs of market participants, implied volatility indices provide a measure of consensus expectations that can be useful in understanding the nonlinear behavior of volatility expectations during periods of financial instability.

scholarly journals Optimizing Credit Gaps for Predicting Financial Crises: Modelling Choices and Tradeoffs

2021 ◽  
Vol 2021 (1307) ◽  
pp. 1-40
Author(s):  
Daniel O. Beltran ◽  
◽  
Mohammad R. Jahan-Parvar ◽  
Fiona A. Paine ◽  
◽  
...  
Keyword(s):  
Financial Crises ◽  
Decomposition Methods ◽  
Cycle Decomposition ◽  
Common Trend ◽  
New Information ◽  
Early Warning Indicators ◽  
Out Of Sample ◽  
Credit Gap ◽  
Out Of Sample Prediction ◽  
Warning Indicators

Credit gaps are good predictors for financial crises, and banking regulators recommend using them to inform countercyclical capital buffers for banks. Researchers typically create credit gap measures using trend-cycle decomposition methods, which require many modelling choices, such as the method used, and the smoothness of the underlying trend. Other choices hinge on the tradeoffs implicit in how gaps are used as early warning indicators (EWIs) for predicting crises, such as the preference over false positives and false negatives. We evaluate how the performance of credit-gap-based EWIs for predicting crises is influenced by these modelling choices. For the most common trend-cycle decomposition methods used to recover credit gaps, we find that optimally smoothing the trend enhances out-of-sample prediction. We also show that out-of sample performance improves further when we consider a preference for robustness of the credit gap estimates to the arrival of new information, which is important as any EWI should work in real-time. We offer several practical implications.

Antitrust Law Amidst Financial Crises

2009 ◽  
Author(s):  
Ioannis Kokkoris ◽  
Rodrigo Olivares-Caminal
Keyword(s):  
Financial Crises ◽  
Antitrust Law

Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective

2016 ◽  
Vol 1 ◽  
pp. 308-317
Author(s):  
Adi Rahmanur Ibnu
Keyword(s):  
Financial Crises ◽  
Global Economy ◽  
Banking Sector ◽  
Islamic Law ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Capital Adequacy Ratio ◽  
Global Banking ◽  
Banking Development

Bank is one of the most important pillars of economy activities. However, banking sector has a real potential crisis threat. Alongside with the steady current global banking development, financial crises that have happened clearly affected global economy. Based on that situation, BIS (Bank for International Settlement) – an international financial standard setting organization, realizes the urgency to establishan international financial standard and supervision to anticipate future potential financial crises. This research aims to identify how Capital Adequacy Ratio Standard in Basel Capital Accord (II) based on Islamic law perspective. The research is conducted by analyzing Basel Capital Accord published by BIS. The research uses library research method to find out the aimed result. The focus is on the 1st pillar of Basel II publication that is Minimum Capital Requirements (CAR) policy. CAR, as an Islamic economics policy, will be analyzed using falāḥ approach. Falāḥ is an Islamic economics objective that consists of happiness, success, accomplishment or good luck concept. The earthly dimension of falāḥ has some parameters that can be used to analyze Islamic economics policy. Additionally, the Islamic fiqh maxim takes part in analyzing the policy. The maṣlaḥat concept in fiqh maxim approach shares aim with falāḥ concept in the sense that all of sharia law aims for success, happiness, eternal survival etc. The maṣlaḥat can be accomplished by extinguishing mafsadat or seizing maṣlaḥat. The maṣlaḥat aspect is essential to determine the compatibility Basel Capital Accord with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl). The conclusion results are, 1) Basel Capital Accord focuses on macro-prudential aspect in order to anticipate potential financial crises, 2) beneficial/interest (maṣlaḥat) aspects of the hereafter, cooperation principle, justice, fairness and the prohibition of exploitation are not the core value of Basel Capital Accord frame work, thus 3) the achievement of maslahat as intended by sharia i.e. jurisprudential maxim are not convincing. Therefore, 4) Basel Capital Accord as a regulation basis is not in line with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl).

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