Narrative Economics Alliance Ruhr (NEAR)
NEAR lays the foundation for the development of the UAR into a leading European location in the new field of "Narrative Economics" and for strengthening the UAR competence field of Empirical Economic Research. The goal is excellent joint preparatory work for the application of a DFG Research Training Group. The project makes theoretical, methodological and empirical research contributions. In theory development, the focus is on a conceptual clarification of the concept of "narratives" and the development of new modelling approaches with agent-based models. Methodologically, there will be further development of suitable analytical procedures for narrative recognition from text data, for the adequate calibration of topic models for narrative economic questions, and in the development of inference procedures tailored to narrative research. Empirically, the question of causality between media-mediated narratives and macroeconomic and financial dynamics is investigated and it is examined whether narratives have predictive power for economic variables. In terms of content, the focus is on sustainability narratives. NEAR combines competences from the fields of economic theory, economic journalism, finance and statistics/econometrics. Networking workshops have already initiated an interdisciplinary exchange, which is being continued within the UAR as well as internationally.
Agency Problems in Loan Securitizations
This project examines agency problems in the context of securitization of loans, in particular real estate loans. The agency problems resulting from such securitizations contributed significantly to the emergence of the financial crisis. Since then, various regulatory measures have been implemented to counteract these problems and restore investor confidence, such as minimum retention and the so-called STS ("simple, transparent, standardised") regulation. However, already at the time of the introduction of minimum retention, it was disputed whether a five percent retention is suitable for a harmonization of interests between investors and originators. This project aims to analyze which agency problems exist in the securitization market and whether the measures taken lead to an effective reduction of agency problems. These analyses are enabled by the fact that information on the development of securitized loans at the individual loan level is now available. To this end, this project firstly examines the impact of retention on the quality of the securitized loans at the time of securitization. Secondly, the impact of retention on the behaviour of banks in the context of monitoring and workout after securitization is analyzed. Thirdly, it is examined whether the complexity of securitizations, in particular with regard to transparency in the context of investment prospectuses, provides conclusions on the performance of securitizations. Fourthly, it is analyzed whether the increased transparency requirements of STS regulation lead to an effective reduction of agency problems.
Contact: Prof. Dr. Martin Hibbeln
Link to the project page
Applied Financial Econometrics
Through the cooperative teaching project "Applied Financial Econometrics", in times of high demand for highly quantitatively trained graduates with sound knowledge in the analysis of large data sets, we offer a labour market-oriented and contemporary qualification that optimally prepares students for an academic career as well as non-university careers. At the same time, the project contributes to strengthening the attractiveness of the study area. Through an innovative didactic approach, we build a bridge between several study programmes and locations, considering current needs and developments. Specifically, through the development of joint modules, we intend to strengthen econometric methodological competence, the application of financial statistical methods in various programming environments, the learning of scientific working methods and the discussion of current topics in the field of finance. A "modular structure" of both the methods and the scientific publications to be dealt with ensures an optimal fit into the various courses of study.
Contact: Raphael Kopp
Link to the project page
Insurance and Trading of Catastrophe Risks: Influencing Factors, Pricing and Return Anomalies in the Secondary Market for CAT Bonds
The (re)insurance market has only a limited capacity to cover extreme events. As an alternative, catastrophe bonds are suitable for transferring catastrophe risks to the capital market, so that investors assume a large part of the financial risks (and receive coupon payments in return). A key feature here is the tradability of the risks on the secondary market. In this context, it is surprising that research to date has focused almost exclusively on the primary market, whereas secondary market trading of cat bonds remains largely unexplored. Thus, the academic literature has so far ignored the fact that cat bonds are subject to a pronounced seasonality, which is elementary for their pricing.
Based on a new methodology for accounting for seasonal variations in cat bonds, new explanatory and forecasting models can be created. By using secondary market data with this methodology, the usable data is multiplied. On this basis, on the one hand, a verification and expansion of explanatory models of cat bond spreads can take place. On the other hand, the analysis of yields on the secondary market allows a better understanding of the pricing of cat bonds, which supports insurance companies, especially in the case of new issues. Overall, the results thus contribute to a better understanding of the cat bond market and to an increase in market efficiency.