BoE published a working paper that applies algorithmic analysis to large amounts of financial market text-based data to assess how narratives and sentiment play a role in driving developments in the financial system. The authors make use of a variety of data sources with a financial sector focus, including BoE internal market commentary, broker reports, and Reuters News Archive.
The authors find that changes in the emotional content in market narratives are highly correlated across data sources. They show, clearly, the formation (and subsequent collapse) of very high levels of sentiment—high excitement relative to anxiety—prior to the global financial crisis. The metrics also have predictive power for other commonly used measures of sentiment and volatility and appear to influence economic and financial variables. The authors developed a new methodology that attempts to capture the emergence of narrative topic consensus, which gives an intuitive representation of increasing homogeneity of beliefs prior to the crisis. With increasing consensus around narratives high in excitement and lacking anxiety likely to be an important warning sign of impending financial system distress, the quantitative metrics the authors developed may complement other indicators and analysis in helping to gauge systemic risk.
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Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED released hypothetical scenarios for a second round of stress tests for banks.
PRA published updates in relation to the 2021 Supervisory Benchmarking Portfolio exercise.
FED adopted a proposal to extend for three years, with revision, the capital assessments and stress testing reports (FR Y-14A/Q/M; OMB No. 7100-0341).
HKMA revised the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.