Detecting financial collapse and ballooning sovereign risk

• Main Authors: PHILLIPS, Peter C. B., SHI, SP
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Collapse; Crash; Exuberance; Recursive test; Rolling test; Sovereign risk; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2350; https://ink.library.smu.edu.sg/context/soe_research/article/3349/viewcontent/Detecting_Financial_Collapse_sv.pdf
• Institution: Singapore Management University

This paper proposes a new model for capturing discontinuities in the underlying financial environment that can lead to abrupt falls, but not necessarily sustained monotonic falls, in asset prices. This notion of price dynamics is consistent with existing understanding of market crashes, which allows...