Decomposing large banks' systemic trading losses / by Radoslav Raykov.: FB3-5/2024-6E-PDF
"Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks. While portfolio overlap generates strong comovements, I find that the sensitivity to common shocks from non-overlapping assets is larger. This sensitivity operates through two sub-channels: the short-long interest rate correlation and the stock-bond correlation, driven by macroeconomic factors. This reveals a new trade-off whereby reductions in portfolio overlap can increase the comovement of trading losses by adding exposures to macro shocks"--Abstract, page ii.
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| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Decomposing large banks' systemic trading losses / by Radoslav Raykov. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2024-6 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | ISSN assigned to different series. "Last updated: March 7, 2024." Includes bibliographical references (pages 26-30). Includes abstracts in English and French. |
| Publishing information | [Ottawa] : Bank of Canada = Banque du Canada, 2024. ©2024 |
| Author / Contributor | Raykov, Radoslav S., author. |
| Description | 1 online resource (ii, 40 pages) : illustrations (some colour). |
| Catalogue number |
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| Subject terms | Bank investments -- Econometric models. Financial crises -- Econometric models. Banques -- Investissements -- Modèles économétriques. Crises financières -- Modèles économétriques. |
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