Financial economics

OptionMetrics Head Quantitative Researcher Garrett DeSimone Ph.D. to Give Keynote at QuantVision Conference in New York City on April 4

Retrieved on: 
Wednesday, April 3, 2024

OptionMetrics Head of Quantitative Research Garrett DeSimone Ph.D. will give a keynote on Risk Neutral Factors – Implied Variance Asymmetry and Beta at Fordham’s Quantitative Conference – QuantVision – on April 4 in New York City.

Key Points: 
  • OptionMetrics Head of Quantitative Research Garrett DeSimone Ph.D. will give a keynote on Risk Neutral Factors – Implied Variance Asymmetry and Beta at Fordham’s Quantitative Conference – QuantVision – on April 4 in New York City.
  • DeSimone, who holds a Ph.D. in Financial Economics from University of Delaware, where he served as an adjunct lecturer, will propose a new, combined factor for institutional investors to leverage in assessing risk.
  • “A common drawback of utilizing volatility as a measure to assess stocks with upside potential and risk is that it treats upside gains and downside losses as having the same relative riskiness.
  • Our research at OptionMetrics shows how integrating existing factors such as implied beta and implied variance asymmetry (IVA) into portfolio construction can provide another useful tool to assess risk,“ says DeSimone .

Isabel Schnabel: R(ising) star?

Retrieved on: 
Wednesday, April 3, 2024

This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey.

Key Points: 
  • This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey.
  • The findings suggest that households have primarily adjusted their consumption spending to cope with higher inflation.

US monetary policy is more powerful in low economic growth regimes

Retrieved on: 
Tuesday, April 2, 2024
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Key Points: 

    The impact of regulatory changes on rating behaviour

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    Tuesday, April 2, 2024
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    Abstract

    Key Points: 
      • Abstract
        We examine rating behaviour after the introduction of new regulations regarding Credit Rating
        Agencies (CRAs) in the European securitisation market.
      • There is empirical evidence of rating catering in the securitisation market in the pre-GFC period (He et al.,
        2012; Efing and Hau, 2015).
      • Competition among
        CRAs could diminish ratings quality (Golan, Parlour, and Rajan, 2011) and promotes rating shopping by
        issuers resulting in rating inflation (Bolton et al., 2012).
      • This paper investigates the impact of the post-GFC regulatory changes in the European
        securitisation market.
      • In 2011, in addition to the creation of
        European Securities and Markets Authority (ESMA), a regulatory and supervisory body for CRAs was
        introduced.
      • We examine how rating behaviours have changed in the European securitisation market after the
        introduction of these new regulations.
      • We utilise the existence of multiple ratings and rating agreements between
        CRAs to identify the existence of rating shopping and rating catering, respectively (Griffin et al., 2013; He
        et al., 2012; 2016).
      • We find that the regulatory changes have been effective in tackling conflicts of interest between issuers
        and CRAs in the structured finance market.
      • Rating catering, which is a direct consequence of issuer and
        CRA collusion, seems to have disappeared after the introduction of these regulations.
      • There is empirical evidence of rating catering in the securitisation market in
        the pre-GFC period (He et al., 2012; Efing and Hau, 2015).
      • Competition among CRAs could diminish ratings quality (Golan, Parlour,
        and Rajan, 2011) and promotes rating shopping by issuers resulting in rating inflation (Bolton et
        al., 2012).
      • This paper investigates the impact of the post-GFC regulatory changes in the European
        securitisation market.
      • In 2011, in addition
        to the creation of European Securities and Markets Authority (ESMA), a regulatory and
        supervisory body for CRAs was introduced.
      • We find that the regulatory changes have been effective in tackling conflicts of interest
        between issuers and CRAs in the structured finance market.
      • Rating catering, which is a direct
        consequence of issuer and CRA collusion, seems to have disappeared after the introduction of
        these regulations.
      • Investors who previously demanded higher spreads for rating agreements for a
        multiple rated tranche, did not consider the effect of rating harmony as a risk in the post-GFC
        period.
      • Regarding rating shopping, we find that the effectiveness of the changes has been limited,
        potentially for two reasons.
      • Additionally, we also find that rating over-reliance might still be an issue, especially
        Rating catering is a broad term and it can involve rating shopping.
      • They re-examine the rating shopping and rating
        catering phenomena in the US market by looking at the post-crisis period between 2009 and 2013.
      • Using 622 CDO tranches, they also observe the existence of rating shopping and the diminishing
        of the rating catering.
      • Firstly, our main focus is the EU?s CRA Regulation and its effectiveness in reducing
        rating inflation and rating over-reliance.
      • To the best of our knowledge, this paper is the first to
        examine the effectiveness of the EU?s CRA regulatory changes on the investors? perception of
        rating inflation in the European ABS market.
      • Hence, the coverage and quality of our dataset constitutes significant addition
        to the literature and allows us to test the rating shopping and rating catering more authoritatively.
      • The following section reviews the literature
        on securitisation concerning CRAs and conflicts of interest, and outlines the regulatory changes
        introduced in the post-GFC period.
      • Firstly, ratings became ever more important as the Securities and
        Exchange Commission (SEC) 5 began heavily relying on CRA assessments for regulatory purposes
        (i.e.
      • the investment mandates that highlight rating agencies as the main benchmark for investment
        eligibility) (SEC, 2008; Kisgen and Strahan, 2010; Bolton et al., 2012).
      • issuers) as one of the main explanations for the rating inflation (He et al., 2011; 2012; Bolton
        et al., 2012; Efing and Hau, 2015).
      • Bolton et al., (2012) demonstrate that competition
        promotes rating shopping by issuers, leading to rating inflation.
      • The last phase, CRA III, was implemented in mid-2013 and involves an additional
        set of measures on reducing transparency and rating over-reliance.
      • As mentioned above, rating inflation can be caused by rating shopping
        In order to be eligible to use the STS classification, main parties (i.e.
      • The higher the difference in the number of ratings for a
        given ABS tranche, the greater the risk of rating shopping.
      • Alternatively, the impact of the new
        regulations could be limited when it comes to reducing rating shopping.
      • This is because, firstly,
        the conflict of interest between securitisation parties is not necessarily the sole cause for the
        occurrence of rating shopping.
      • L is a set of variables (Multiple ratings, CRA reported, Rating agreement) that
        we utilise interchangeably to capture the rating shopping and rating catering behaviour.
      • Hence, issuers are incentivised to report the highest possible rating and
        ensure each additional rating matches the desired level.
      • All in all, our results suggest that
        the new stricter regulatory measures have been effective in tackling conflicts of interest and
        reducing rating inflation caused by rating catering.
      • Self-selection might be a concern in analysing the impact of the
        new measures and investors? response with regard to the rating inflation.
      • This
        result is in line with the earlier findings suggesting that regulatory changes have reduced investors?
        suspicion of rating inflation and increased trust of CRAs.
      • Conclusion
        Several regulatory changes were introduced in Europe following the GFC aimed at tackling
        conflicts of interest between issuers and CRAs in the ABS market.
      • Utilising a sample of 12,469
        ABS issued between 1998 and 2018 in the European market, this paper examined whether these
        changes have had any impact on rating inflations caused by rating shopping and rating catering
        phenomena.
      • We find that the
        effectiveness of the changes has been more limited on rating shopping potentially for two reasons.
      • Tranche Credit Rating is the rating reported for a tranche at launch.

    Rover Appoints Gunnar Pedersen as Director

    Retrieved on: 
    Monday, March 11, 2024

    Vancouver, BC, Mar 11, 2024 - (ACN Newswire) - Rover Critical Minerals Corp. (TSXV:ROVR)(OTCQB:ROVMF)(FSE:4XO) (" Rover " or the " Company ") is pleased to announce the appointment of Gunnar Pedersen to the Company's Board of Directors.

    Key Points: 
    • Vancouver, BC, Mar 11, 2024 - (ACN Newswire) - Rover Critical Minerals Corp. (TSXV:ROVR)(OTCQB:ROVMF)(FSE:4XO) (" Rover " or the " Company ") is pleased to announce the appointment of Gunnar Pedersen to the Company's Board of Directors.
    • Salim Tharani has tendered his resignation as Director to accommodate the appointment of Mr. Pedersen.
    • Mr. Pedersen holds a Graduate degree in Financial Economics from the Norwegian School of Economics and is a CFA charter holder.
    • Judson Culter, CEO at Rover, states "Appointing Gunnar to our Board of Directors is part of our one-two punch strategy of bolstering our ranks.

    Philip R. Lane: Euro area international financial flows: analytical insights and measurement challenges

    Retrieved on: 
    Tuesday, February 13, 2024

    We document how gas price fluctuations have a heterogeneous pass-through to euro area prices depending on the underlying shock driving them.

    Key Points: 
    • We document how gas price fluctuations have a heterogeneous pass-through to euro area prices depending on the underlying shock driving them.
    • Supply shocks, moreover, are found to pass through to all components of euro area inflation – producer prices, wages and core inflation, which has implications for monetary policy.

    Policy expectation errors during the recent tightening cycle – insights from the ECB’s Survey of Monetary Analysts

    Retrieved on: 
    Friday, February 9, 2024

    This box measures the size and dynamics of policy expectation errors.

    Key Points: 
    • This box measures the size and dynamics of policy expectation errors.
    • Based on information from the ECB’s Survey of Monetary Analysts, it suggests that these expectation errors were driven mainly by revisions to macroeconomic expectations, indicating that analysts perceived a broadly consistent policy reaction to macroeconomic developments.

    Northern Trust Asset Management Names New International Head of Quantitative Strategies

    Retrieved on: 
    Wednesday, November 15, 2023

    Northern Trust Asset Management (NTAM), a leading global investment management firm with $1.09 trillion in assets under management as of September 30, 2023, announced today that Guido Baltussen, Ph.D. has joined NTAM as Head of Quantitative Strategies, International.

    Key Points: 
    • Northern Trust Asset Management (NTAM), a leading global investment management firm with $1.09 trillion in assets under management as of September 30, 2023, announced today that Guido Baltussen, Ph.D. has joined NTAM as Head of Quantitative Strategies, International.
    • In this newly created role, Baltussen will lead NTAM’s international quantitative strategies investments to support our growth, including quantitative research and innovation, thought leadership, and investment strategy.
    • Baltussen will report to Michael Hunstad, Northern Trust Asset Management’s Deputy Chief Investment Officer and Chief Investment Officer of Global Equities.
    • Previously, he was head of quantitative research for multi-asset strategies at NN Investment Partners and a quantitative investment strategist with ING Investment Management.