References of "Pierret, Diane 50036154"
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See detailLender of Last Resort, Buyer of Last Resort, and a Fear of Fire Sales in the Sovereign Bond Market
Acharya, Viral; Pierret, Diane UL; Steffen, Sascha

in Financial Markets, Institutions and Instruments (2021), 30(4),

We document the mechanism through which the risk of fire sales in the sovereign bond market contributed to the effectiveness of two major central bank interventions designed to restore financial stability ... [more ▼]

We document the mechanism through which the risk of fire sales in the sovereign bond market contributed to the effectiveness of two major central bank interventions designed to restore financial stability during the European sovereign debt crisis. As a lender of last resort via the long-term refinancing operations (LTROs), the European Central Bank (ECB) improved the collateral value of sovereign bonds of peripheral countries. This resulted in an elevated concentration of these bonds in the portfolios of domestic banks, increasing fire-sale risk and making both banks and sovereign bonds riskier. In contrast, the ECB's announcement of being a potential buyer of last resort via the Outright Monetary Transaction (OMT) program attracted new investors and reduced fire-sale risk in the sovereign bond market. [less ▲]

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See detailSystemic Risk and the Solvency-Liquidity Nexus of Banks
Pierret, Diane UL

in International Journal of Central Banking (2015), (40),

This paper highlights the empirical interaction between solvency and liquidity risks of banks that make them particularly vulnerable to an aggregate crisis. In line with the literature explaining bank ... [more ▼]

This paper highlights the empirical interaction between solvency and liquidity risks of banks that make them particularly vulnerable to an aggregate crisis. In line with the literature explaining bank runs based on the quality of the bank’s fundamentals, I find that banks lose their access to short-term funding when markets expect they will be insolvent in a crisis. This solvency-liquidity nexus is found to be strong under many robustness checks and to contain useful information for forecasting the short-term balance sheet of banks. The results suggest that capital not only acts as a loss-absorbing buffer, but it also ensures the confidence of creditors to continue to provide funding to the banks in a crisis. [less ▲]

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See detailTesting Macroprudential Stress Tests: The Risk of Regulatory Risk Weights
Acharya, Viral; Engle, Robert; Pierret, Diane UL

in Journal of Monetary Economics (2014), 65(July 2014), 36-53

We compare the capital shortfall measured by regulatory stress tests, to that of a benchmark methodology — the “V-Lab stress test” — that employs only publicly available market data. We find that when ... [more ▼]

We compare the capital shortfall measured by regulatory stress tests, to that of a benchmark methodology — the “V-Lab stress test” — that employs only publicly available market data. We find that when capital shortfalls are measured relative to risk-weighted assets, the ranking of financial institutions is not well correlated to the ranking of the V-Lab stress test, whereas rank correlations increase when required capitalization is a function of total assets. We show that the risk measures used in risk-weighted assets are cross-sectionally uncorrelated with market measures of risk, as they do not account for the “risk that risk will change.” Furthermore, the banks that appeared to be best capitalized relative to risk-weighted assets were no better than the rest when the European economy deteriorated into the sovereign debt crisis in 2011. [less ▲]

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See detailMultivariate Volatility Modeling of Electricity Futures
Bauwens, Luc; Hafner, Christian; Pierret, Diane UL

in Journal of Applied Econometrics (2013), 28(5), 743-761

We model the dynamic volatility and correlation structure of electricity futures of the European Energy Exchange index. We use a new multiplicative dynamic conditional correlation (mDCC) model to separate ... [more ▼]

We model the dynamic volatility and correlation structure of electricity futures of the European Energy Exchange index. We use a new multiplicative dynamic conditional correlation (mDCC) model to separate long-run from short-run components. We allow for smooth changes in the unconditional volatilities and correlations through a multiplicative component that we estimate nonparametrically. For the short-run dynamics, we use a GJR-GARCH model for the conditional variances and augmented DCC models for the conditional correlations. We also introduce exogenous variables to account for congestion and delivery date effects in short-term conditional variances. We find different correlation dynamics for long- and short-term contracts and the new model achieves higher forecasting performance compared \to a standard DCC model. [less ▲]

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