The COVID-19 pandemic, apart from leading to human cases and deaths, is also distracting the shipping stock market and the Baltic Indices. While event studies, as well as macroeconomic research has been conducted in the literature, we have not witnessed any effort yet to investigate how external shocks - and in particular the COVID-19 outbreak - may impinge on the shipping markets. Therefore, our research tries to fill in this gap by studying how a sanitary incident might influence shipping freight rates and stock values. We have used a market-model event study approach to investigate how fast and comprehensively shipping markets react upon certain latest evidence. To quantify the pandemic's economic impact, we estimated the abnormal returns; in a phase before and after the event, they may work as a measure of the unexpected effect of the event on a shipping firm's performance. The data that we have used in stock analysis come from a major shipping index, while for our freight study, time-series come from all main Baltic indices. Our results show that according to the key date set as the event window, different results appear of how pandemic-proof the dry market, the tanker market, and the shipping stock market have proven to be.
Abstract:Credit risk measurement remains a critical field of top priority in banking finance, directly implicated in the recent global financial crisis. This paper examines the dynamic linkages between credit risk migration due to rating shifts and prevailing macroeconomic conditions, reflected in alternative business cycle states. An innovative empirical methodology applies to bank internal rating data, under different economic scenarios and investigates the implications of credit risk quality shifts for risk rating transition matrices. The empirical findings are useful and critical for banks to align to Basel guidelines in relation to core capital requirements and risk-weighted assets in the underlying loan portfolio.
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