nep-fmk New Economics Papers
on Financial Markets
Issue of 2009‒09‒11
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The financial crisis of 2008 in fixed income markets By Gerald P. Dwyer; Paula Tkac
  2. European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries By Sebastian Weber
  3. What Is the Impact of the Global Financial Crisis on the Banking System in East Asia? By Michael Pomerleano
  4. The Financial Integration of the European Union: Common and Idiosyncratic Drivers By Chris Higson; Sean Holly; Ivan Petrella
  5. Stress Testing Credit Risk: Is the Czech Republic Different from Germany? By Petr Jakubik; Christian Schmieder
  6. Do S&P's Corporate Ratings Reflect Credit Shocks? By Elsas, Ralf; Sabine, Mielert

  1. By: Gerald P. Dwyer; Paula Tkac
    Abstract: We explore how a relatively small amount of heterogeneous securities created turmoil in financial markets in much of the world in 2007 and 2008. The drivers of the financial turmoil and the financial crisis of 2008 were heterogeneous securities that were hard to value. These securities created concerns about counterparty risk and ultimately created substantial uncertainty. The problems spread in ways that were hard to see in advance. The run on prime money market funds in September 2008 and the effects on commercial paper were an important aspect of the crisis itself and are discussed in some detail.
    Date: 2009
  2. By: Sebastian Weber
    Abstract: The European Union made a number of steps not least of them the introduction of a common currency to foster the integration of the European financial markets. A number of papers have tried to gauge the degree of integration for various financial markets looking at the convergence of interest rates. A common finding is that government bond markets are quite well integrated. In this paper stochastic Kernel density estimates are used to take a closer look at the dynamics that drive the process of interest rate convergence. The main finding is that countries with large initial deviations from the mean interest rate do indeed converge. Interestingly the candidates least suspected namely the countries initially with interest rates at the mean level show a pattern of slight divergence.
    Keywords: Financial markets integration, euro area government bonds, stochastic Kernel density estimates
    JEL: C23 E44 G15
    Date: 2009
  3. By: Michael Pomerleano
    Abstract: This paper assesses the condition and outlook of the financial sectors—in particular, the banking sector—in the East Asia region in the aftermath of the current global financial crisis. The risks in the banking systems in East Asia are analyzed using the standard supervisory framework, which assesses capital adequacy, asset quality, management, earnings, and liquidity (CAMEL). [WP 146].
    Keywords: financial sectors, banking sector, banking, financial, East Asia, Asia, banking system, capital, capital adequacy, asset, management, earnings, liquidity, CAMEL, global financial crisis, Thailand, exchange rate, lonas, Japan,
    Date: 2009
  4. By: Chris Higson; Sean Holly; Ivan Petrella
    Abstract: The purpose of this paper is to establish how far the process of financial integration has gone in the European Union. There is growing evidence that the appearance of the Euro has accelerated the integration of a number of financial markets among those countries who have adopted the Euro. We identify the growth in financial integration as the process by which idiosyncratic factors at the national level become less and less important for the behaviour of particular markets. While the Euro plays an important part because it eliminates currency risk, financial integration will still emerge between other European countries as long as the institutional and legal barriers are removed.
    Date: 2009
  5. By: Petr Jakubik; Christian Schmieder
    Abstract: This study deals with credit risk modelling and stress testing within the context of a Merton-type one-factor model. We analyse the corporate and household sectors of the Czech Republic and Germany to find determining variables of credit risk in both countries. We find that a set of similar variables explains corporate credit risk in both countries despite substantial differences in the default rate pattern. This does not apply to households, where further research seems to be necessary. Next, we establish a framework for the stress testing of credit risk. We use a country specific stress scenario that shocks macroeconomic variables with medium severity. The test results in credit risk increasing by more than 100% in the Czech Republic and by roughly 40% in Germany. The two outcomes are not fully comparable since the shocks are calibrated according to the historical development of the time series considered and the size of the shocks for the Czech Republic was driven by the transformation period.
    Keywords: Credit risk, credit risk modelling, stress testing.
    JEL: G21 G28 G33
    Date: 2008–12
  6. By: Elsas, Ralf; Sabine, Mielert
    Keywords: Credit Ratings; Validation; Rating Regulation
    JEL: G14 G28 G33
    Date: 2009–08–24

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