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Years after the greatest financial crisis of the century, the movie ‘The Big Short’ has raised many questions, especially concerning the Bespoke Tranche Opportunity. BTOs are taking more importance on the financial market and fear concerning these products, in particular due to their similarities with CDOs, is increasing.

The purpose of this thesis is to analyze BTOs and in particular the risks they represent. 

First, some key notions like financial stability or moral hazard are explained. In order to provide an in-depth work, shadow banking in general and financial information on different countries are also part of the research. A further reflection is made about other risks present on the market, such as state indebtedness for example. 

This research work combines theoretical literacy and a collection of opinions coming from business professionals. Rather than filling certain gaps in the scientific literature, this paper is intended to raise awareness of BTOs, and particularly draw the attention of the scientific community to the necessity of writing accurate papers on BTOs and the attention of the authorities to run studies and write financial reports on BTOs.

Bespoke Tranche Opportunity --- Collateralized Debt Obligation --- Regulatory Framework --- Financial Stability --- Too Big To Fail --- Bail-in --- Financial risks --- Sciences économiques & de gestion > Finance

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In the East Asian crisis, connections - with industrial groups or influential families - increased the probability of distress for financial institutions. Connections also made closure more, not less, likely, suggesting that the closure processes themselves were transparent. But larger institutions, although more likely to be distressed, were less likely to be closed, suggesting a too big to fail policy; Politics and regulatory capture can play an important role in financial institutions' distress. East Asia's financial crisis featured many distressed and closed financial intermediaries in an environment with many links between government, politicians, supervisors, and financial institutions. This makes the East Asian financial crisis a good event for studying how such connections affect the resolution of financial institutions' distress. Bongini, Claessens, and Ferri investigate distress and closure decisions for 186 banks and 97 nonbank financial institutions in Indonesia, the Republic of Korea, Malaysia, the Philippines, and Thailand. They find that after July 1997, 42 percent of the institutions experienced distress (were closed, merged, or recapitalized, or had their operations temporarily suspended). By July 1999, 13 percent of all institutions in existence in July 1997 had been closed. Using financial data for 1996, the authors find that: Traditional CAMEL-type variables - returns on assets, loan growth, and the ratio of loan loss reserves to capital, of net interest income to total income, and of loans to borrowings - help predict subsequent distress and closure; None of the foreign-controlled institutions was closed, and foreign portfolio ownership lowered an institution's probability of distress; Connections - with industrial groups or influential families - increased the probability of distress, suggesting that supervisors had granted forbearance from regulations. Connections also made closure more, not less, likely - suggesting that the closure processes themselves were transparent; But larger institutions, although more likely to be distressed, were less likely to be closed, while (smaller) nonbank financial institutions were more likely to be closed. This suggests a too big to fail policy; These policies, together with the fact that resolution processes were late and not necessarily comprehensive, may have added to the overall uncertainty and loss of confidence in the East Asian countries, aggravating the financial crisis. This paper - a product of the Financial Sector Strategy and Policy Group, Financial Sector Vice Presidency - is part of a larger effort in the group to study the causes and resolution of financial distress. The authors may be contacted at pbongini@mi.unicatt.it, cclaessens@worldbank.org, or gferri@worldbank.org.

Balance Sheet --- Banking System --- Banks and Banking Reform --- Currencies and Exchange Rates --- Debt Markets --- E-Business --- Economic Policy, Institutions and Governance --- Emerging Markets --- Finance --- Finance and Financial Sector Development --- Financial Crisis --- Financial Distress --- Financial Institutions --- Financial Intermediation --- Financial Literacy --- Financial Risks --- Good --- Interest --- Interest Income --- Investors --- Loan --- Loans --- Loss Of Confidence --- Macroeconomics and Economic Growth --- Non Bank Financial Institutions --- Political Economy --- Portfolio --- Private Sector Development --- Prudential Regulations --- Public Institution Analysis and Assessment --- Public Sector Development --- Reserves --- Return --- Return On Assets

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This paper analyzes institutional arrangements for public debt management by reviewing the experience of OECD countries during the late 1980s and 1990s. It discusses principal-agent issues arising from the delegation of authority from the Minister of Finance to the debt management office and describes how countries have designed governance structures and control and monitoring mechanisms to deal with these issues. The paper also discusses what lessons emerging market countries and transition countries can draw from the experience of advanced OECD countries. The OECD experience clearly indicates that-regardless of whether the debt management office is located inside or outside the Ministry of Finance-four issues are of vital importance: Giving priority to strategic public policy objectives rather than tactical trading objectives; Strengthening the institutional capacity to deal with financial portfolio management and with the public policy aspects of debt management; Modernizing debt management; Creating mechanisms to ensure successful delegation and accountability to the Ministry of Finance and Parliament. This paper-a joint product of the Office of the Senior Vice President and Chief Economist, Development Economics, and Public Debt Management Group, Banking, Capital Markets, and Financial Engineering Department-is part of a larger effort in the Bank to analyze the institutional dimentions of effective government policy.

Bank Policy --- Banks and Banking Reform --- Central Bank --- Corporate Governance --- Debt Markets --- Emerging Market --- Emerging Market Countries --- Emerging Market Economies --- Emerging Markets --- Exchange --- Exchange Rate --- External Debt --- Finance --- Finance and Financial Sector Development --- Financial Literacy --- Financial Management --- Financial Portfolio --- Financial Risks --- Institutional Capacity --- International Economics & Trade --- Monetary Policy --- Portfolio Management --- Principal-Agent Problem --- Private Sector Development --- Public and Municipal Finance --- Public Debt --- Public Debt Management --- Public Sector Economics and Finance --- Strategic Debt Management --- Trading --- Transition Countries --- Urban Development --- Urban Economics

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Risk measures play a vital role in many subfields of economics and finance. It has been proposed that risk measures could be analysed in relation to the performance of variables extracted from empirical real-world data. For example, risk measures may help inform effective monetary and fiscal policies and, therefore, the further development of pricing models for financial assets such as equities, bonds, currencies, and derivative securities.A Special Issue of “Risk Measures with Applications in Finance and Economics” will be devoted to advancements in the mathematical and statistical development of risk measures with applications in finance and economics. This Special Issue will bring together the theory, practice and real-world applications of risk measures. This book is a collection of papers published in the Special Issue of “Risk Measures with Applications in Finance and Economics” for Sustainability in 2018.

risk assessment --- VIX --- business groups --- SHARE --- asymptotic approximation --- European stock markets --- whole life insurance --- dynamic hedging --- risk-neutral distribution --- cooperative banks --- Data Envelopment Analysis (DEA) --- group-affiliated --- early warning system --- factor models --- smoothing process --- GMC --- falsified products --- S&P 500 index options --- credit derivatives --- corporate sustainability --- term life insurance --- risk management --- crude oil --- financial stability --- social efficiency --- dynamic conditional correlation --- emerging market --- out-of-sample forecast --- financial crisis --- binomial tree --- news release --- green energy --- perceived usefulness --- Bayesian approach --- two-level optimization --- probability of default --- bank risk --- SYMBOL --- information asymmetry --- CoVaR --- probabilistic cash flow --- japonica rice production --- bank profitability --- Monte Carlo Simulations --- gain-loss ratio --- coherent risk measures --- Mezzanine Financing --- national health system --- option value --- conscientiousness --- online purchase intention --- Slovak enterprises --- spot and futures prices --- liquidity premium --- institutional voids --- utility --- random forests --- bankruptcy --- optimizing financial model --- sustainable food security system --- dynamic panel --- co-dependence modelling --- financial performance --- time-varying correlations --- Project Financing --- future health risk --- generalized autoregressive score functions --- volatility spillovers --- financial risks --- simulations --- life insurance --- emotion --- finance risk --- markov regime switching --- diversification --- production frontier function --- Granger causality --- health risk --- risks mitigation --- returns and volatility --- sadness --- low-income country --- the sudden stop of capital inflow --- bank failure --- China’s food policy --- objective health status --- IPO underpricing --- polarity --- climate change --- stock return volatility --- sentiment analysis --- empirical process --- full BEKK --- stochastic frontier model --- perceived ease of use --- volatility transmission --- openness to experience --- sustainability --- low carbon targets --- quasi likelihood ratio (QLR) test --- banking regulation --- sustainable development --- specification testing --- fossil fuels --- time-varying copula function --- tree structures --- monthly CPI data --- coal --- cartel --- regular vine copulas --- sustainability of economic recovery --- ANN --- EGARCH-m --- financial security --- leniency program --- financial hazard map --- uncertainty termination --- causal path --- stakeholder theory --- technological progress --- banking --- investment horizon --- regression model --- two-level CES function --- joy --- the optimal scale of foreign exchange reserve --- carbon emissions --- stochastic volatility --- B-splines --- self-perceived health --- sovereign credit default swap (SCDS) --- RV5MIN --- utility maximization --- credit risk --- policy simulation --- socially responsible investment --- portfolio selection --- scientific verification --- European banking system --- risk-free rate --- wild bootstrap --- medication --- investment profitability --- Amihud’s illiquidity ratio --- multivariate regime-switching --- inflation forecast --- risk aversion --- market timing --- need hierarchy theory --- variance --- diagonal BEKK --- conjugate prior --- risk --- moving averages --- financial risk --- risk measures