Financial instability through the prism of Flight-to-Quality
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Financial instability through the prism of Flight-to-Quality

Financial instability through the prism of Flight-to-Quality


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About the Book

A general theoretical framework is proposed to analyse Flight-to-Quality events, defined as a mass investment migration from risky to safe assets. The model consists of only two asset classes, risky and safe. The framework is applied to Flights-to-Quality from emerging market public debt to U.S. treasuries, in the period 1998-2010. An alarm signal system is designed to warn of upcoming Flights-to-Quality and their terminations, and is applied: (i) to delimiting hypothetical Flights-to-Quality on an ex-ante basis, which are compared with historically observed episodes, to test the quality of the alarm signals; (ii) to elaborate dynamic interest rate risk hedge strategies, characterized by higher returns and lower volatility in comparison with statically hedged investments. The proposed framework potentially allows for improving the timeliness of financial policies, which can be triggered by the alarm signals. It can also be a useful tool for defining adequate policies to be implemented acting either on an insufficient supply of the safe assets or on a decreasing demand for the risky investments, thus contributing to a more stable economic environment.


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Product Details
  • ISBN-13: 9783659515835
  • Publisher: Lap Lambert Academic Publishing
  • Publisher Imprint: LAP LAMBERT Academic Publishing
  • Height: 229 mm
  • No of Pages: 352
  • Series Title: English
  • Weight: 566 gr
  • ISBN-10: 3659515833
  • Publisher Date: 26 Feb 2014
  • Binding: Paperback
  • Language: English
  • Returnable: N
  • Spine Width: 20 mm
  • Width: 152 mm


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Financial instability through the prism of Flight-to-Quality
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Financial instability through the prism of Flight-to-Quality
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