Stress events in the Hungarian stock market

Dömötör, Barbara and Váradi, Kata (2016) Stress events in the Hungarian stock market. Working Paper. Corvinus University of Budapest Faculty of Economics.

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Central clearing and the role of central counterparties (CCP) has gained on importance in the financial sector, since counterparty risk of the trading is to be managed by them. The regulation has turned towards them lately, by defining several processes, how CCPs should measure and manage their risk. Stress situation is an important term of the regulation, however it is not specified clearly, how stress should be identified. This paper provides a possible definition of stress event based on the existing risk management methodology: the usage of risk measure oversteps, and investigates the potential stress periods of the last years on the Hungarian stock market. According to the results the definition needs further calibration based on the magnitude of the cross-sectional data. The paper examines furthermore whether stress is to be predicted from market liquidity. The connection of liquidity and market turmoil proved to be contrary to the expectations; liquidity shortage was rather a consequence, than a forecaster phenomenon in the tested period.

Item Type:Monograph (Working Paper)
Series Name:Corvinus Economics Working Papers - CEWP
Series Number / Identification Number:2016/03
Uncontrolled Keywords:EMIR regulation, Value at Risk models, market liquidity measurement, stress definition
JEL classification:G18 - General Financial Markets: Government Policy and Regulation
G28 - Financial Institutions and Services: Government Policy and Regulation
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Projects:TÁMOP-4.2.4.A/ 211/1-2012-0001
ID Code:2202
Deposited By: Ádám Hoffmann
Deposited On:25 Jan 2016 08:33
Last Modified:25 Jan 2016 08:33

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