SYRTO Working Paper Series: 2 new papers available online
Two new SYRTO working papers are now available online.
In Global Credit Risk: World, Country and Industry Factors, Bernd Schwaab, Siem Jan Koopman and André Lucas investigate the dynamic properties of systematic default risk conditions for firms from different countries, industries, and rating groups. The authors use a high-dimensional nonlinear non-Gaussian state space model to estimate common components in corporate defaults in a 41 country sample between 1980Q1-2014Q4, covering both the global financial crisis and euro area sovereign debt crises.
In The Information in Systemic Risk Rankings, Federico Nucera, Bernd Schwaab, Siem Jan Koopman and André Lucas propose to pool alternative systemic risk rankings for financial institutions using the method of principal components. The resulting overall ranking is less affected by estimation uncertainty and model risk. The authors applied their methodology to disentangle the common signal and the idiosyncratic components from a selection of key systemic risk rankings that are recently proposed.