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- ISIDORE Id: 10670/1.6c2376...
- hal: hal-03287947
- doi: 10.1016/j.ejor.2021.06.037
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Scrip Investment securities Securities law Capitalization (Finance) Blue sky laws Securities--Law and legislation Portfolio Underwriting Companies Partnership--Law and legislation Investing Investment management Portfolio Funds Funding Pattern Model Businesses Firms Companies Enterprises Business organizations Organizations, Business Finance, commerce, confiscations, etcCiter ce document
Giovanni Bonaccolto et al., « Dynamic Large Financial Networks via Conditional Expected Shortfalls », HALSHS : archive ouverte en Sciences de l’Homme et de la Société, ID : 10.1016/j.ejor.2021.06.037
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Résumé
In this article, we first generalize the Conditional Auto-Regressive Expected Shortfall (CARES) model by introducing the loss exceedances of all (other) listed companies in the Expected Shortfall related to each firm, thus proposing the CARES-X model (where the ‘X’, as usual, stands for eXtended in the case of large-dimensional problems). Second, we construct a regularized network of US financial companies by introducing the Least Absolute Shrinkage and Selection Operator in the estimation step. Third, we also propose a calibration approach for uncovering the relevant edges between the network nodes, finding that the estimated network structure dynamically evolves through different market risk regimes. We ultimately show that knowledge of the extreme risk network links provides useful information, since the intensity of these links has strong implications on portfolio risk. Indeed, it allows us to design effective risk management mitigation allocation strategies.
