A Simple Econometric Approach for Modeling Stress Event Intensities

Journal of Futures Markets, Vol. 35, No. 4, pp. 300-320, 2015

29 Pages Posted: 14 Nov 2015

See all articles by Rainer Jobst

Rainer Jobst

University of Regensburg

Daniel Roesch

University of Regensburg

Harald (Harry) Scheule

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network

Martin Schmelzle

University of Regensburg

Date Written: 2015

Abstract

This paper introduces a simple, nonparametric way of inferring risk-neutral credit stress event intensities for idiosyncratic, sectoral, and global shocks contained in market credit spreads. We provide an econometric analysis of the implied latent stress event dynamics. A vector autoregressive regression model with exogenous variables finds that these intensities can be related to an observable stock market index, the market volatility, the volatility skew, and treasury yields.

Keywords: stress event intensity, systemic risk, credit derivative

JEL Classification: C51, G01, G28

Suggested Citation

Jobst, Rainer and Roesch, Daniel and Scheule, Harald and Schmelzle, Martin, A Simple Econometric Approach for Modeling Stress Event Intensities (2015). Journal of Futures Markets, Vol. 35, No. 4, pp. 300-320, 2015, Available at SSRN: https://ssrn.com/abstract=2690809

Rainer Jobst

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Daniel Roesch (Contact Author)

University of Regensburg ( email )

Chair of Statistics and Risk Management
Faculty of Business, Economics and BIS
Regensburg, 93040
Germany

HOME PAGE: http://www-risk.ur.de/

Harald Scheule

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

P.O. Box 123
Broadway, NSW 2007
Australia

HOME PAGE: http://https://www.uts.edu.au/staff/harald.scheule

Financial Research Network ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Martin Schmelzle

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

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