Financial risk distribution in European Union

D’Amico, Guglielmo; Scocchera, Stefania; Storchi, Loriano

doi:10.1016/j.physa.2018.03.069

Cited by 8 publications

(9 citation statements)

References 30 publications

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“…Figure 3 shows the expected value of the dynamic Theil entropy computed with R = 100000 iterations and for 365 days, whereas Table 2 gives results on the moments of the dynamic Theil entropy. The number of considered simulations is in agreement with (D'Amico et al, 2018a) where the authors have showed that it is an adequate number of iterations that guarantees the stability of the results. According to Fig.…”

Section: Resultssupporting

confidence: 78%

“…The implication of a country's default and generally, of an increase of the sovereign credit risk is of crucial importance concerning both its effects on the domestic economy but also on the neighborhood economies. We have focused our attention on the financial risk in European Union by applying dynamic measure of inequality to evaluate how the financial risk is distributed among countries and to assess its behavior over time (D'Amico et al, 2018a;2018b;2019). The financial risk of a country refers to the ability to cope with its financial commitments and it is expressed by the amount of credit spread that the country has to pay on its debt.…”

Section: Introductionmentioning

confidence: 99%

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On the Sensitivity of a Dynamic Measure of Financial Inequality

D’Amico¹,

Scocchera²,

Storchi³

2019

Journal of Mathematics and Statistics

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In the present work, we investigate the sensitivity of the dynamic Theil index computed under a Markov reward model with respect to structured perturbations affecting the underlying Markov process. The model is applied to the sovereign credit spread evolution as a proxy for financial risk, which are driven by the sovereign credit rating dynamic. The introduction of such perturbations allows to evaluate the sensitivity of the inequality of the financial risk in a given group of financial entities with respect to the uncertainty in the rating dynamics. To this end we perform a simulation based sensitivity analysis. The methodology is applied to real data concerning sovereign credit ratings and long-term interest rates on government bonds of 24 European countries. Obtained results suggest different sensitivity of the inequality measure to the 12 scenarios built supposing different ways the perturbations could affect the rating process.

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Section: Resultssupporting

confidence: 78%

Section: Introductionmentioning

confidence: 99%

On the Sensitivity of a Dynamic Measure of Financial Inequality

D’Amico¹,

Scocchera²,

Storchi³

2019

Journal of Mathematics and Statistics

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“…The last addendum summarizes the divergence of the actual distribution about the uniform distribution of countries equally rated. For further information about the interpretation of this index see D'Amico et al (2018).…”

Section: Dynamic Measurement Of the Inequalitymentioning

confidence: 99%

“…The problem of income inequality has been faced by D'Amico et al (2012), whereas the systemic risk has been analysed through a network approach by Westphal (2015). The financial implications of any possible changes in the European structure has been investigated by Escalera and Tarrant (2014) and D'Amico et al (2018).…”

Section: Introductionmentioning

confidence: 99%

“…The present work aims at gaining insights on the behaviour of the financial risk inequality among European countries over the next future. Precisely, we want to extend our previous work (D'Amico et al (2018) to a continuous-time setting with the intention of achieving more precise previsions. We refer to financial risk inequality as a measure that summarizes the degree of disorder or concentration of the financial risk within a given group of countries.…”

Section: Introductionmentioning

confidence: 99%

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A Continuous-Time Inequality Measure Applied to Financial Risk: The Case of the European Union

D’Amico

Regnault

Scocchera

et al. 2018

IJFS

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In this paper, we apply information theory measures and Markov processes in order to analyse the inequality in the distribution of the financial risk in a pool of countries. The considered financial variables are sovereign credit ratings and interest rates of sovereign government bonds of European countries. This paper extends the methodology proposed in our previous work, by allowing the possibility to consider a continuous time process for the credit rating evolution so that complete observations of rating histories and credit spreads can be considered in the analysis. Obtained results suggest that the continuous time model fits real data better than the discrete one and confirm the existence of a different risk perception among the three main rating agencies: Fitch, Moody's and Standard & Poor's. The application of the model has been performed by a software we developed, the full code is available on-line allowing the replication of all results.

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Monitoring the Financial Security of the Economic Subject on the Basis of Financial Risk Assessment

Naumova

Svetkina

2019

Contributions to Economics

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Financial risk distribution in European Union

Cited by 8 publications

References 30 publications

On the Sensitivity of a Dynamic Measure of Financial Inequality

On the Sensitivity of a Dynamic Measure of Financial Inequality

A Continuous-Time Inequality Measure Applied to Financial Risk: The Case of the European Union

Monitoring the Financial Security of the Economic Subject on the Basis of Financial Risk Assessment

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