Researchers, policymakers and commentators have long debated the patterns through which adverse shocks in a few markets may quickly spread to a range of apparently disconnected financial markets causing widespread losses and turmoil.

This book uses modern linear and non-linear econometric methods to characterize how shocks to the yield of risky fixed income securities, such as sub-prime asset-backed or low-credit rating sovereign bonds, are transmitted to the yields in other markets. These include equity and corporate bond markets as well as relatively risk-free fixed income securities, such as highly rated asset-backed securities and sovereign bonds from core Eurozone countries. The authors analyse and compare the results from linear and non-linear models to identify and assess four distinct contagion channels characterizing both US and European financial markets. These include the correlated information, risk premium, flight-to-liquidity, and flight-to quality channels. The results of this study support the theory that both investors and policy-makers ought to pay special attention to liquidity and commonalities in the perceptions of the probabilities of default, as channels through which financial shocks propagate


Hardcover: 112 pages
Publisher: Palgrave Pivot; 1st ed. 2015 edition (November 13, 2015)
Language: English
ISBN-10: 1137561386
ISBN-13: 978-1137561381
Product Dimensions: 8.5 x 5.5 x 0.5 inches
Shipping Weight: 1 pounds
http://www.amazon.com/Transmission-Channels-Financial-Asset-Backed-Markets/dp/1137561386/ref=sr_1_1?ie=UTF8&qid=1452861389&sr=8-1&keywords=Transmission+Channels+of+Financial+Shocks+to+Stock%2C+Bond%2C+and+Asset-Backed+Markets%3A+An+Empirical+Model