Discretionary macroprudential policies aim to be countercyclical by adjusting risk-taking across the financial cycle. This column argues that the opposite effect may happen in certain cases. Depending on how regulators measure risk and how they...
Brexit creates new opportunities and new risks for the British and EU financial markets. Both could benefit, but a more likely outcome is a fall in the quality of financial regulations, more inefficiency, more protectionism, and more systemic risk.
The long-running Greek crisis and China’s recent stock market crash are the latest threats to the stability of the global financial system. But as this column explains, systemic risk is an inevitable part of any market-based economy. While we...
Some financial authorities have proposed designating asset managers as systemically important financial institutions (SIFIs). This column argues that this would be premature and probably ill conceived. The motivation for such a step comes from an...
The proposed EU capital markets union aims to revitalise Europe’s economy by creating efficient funding channels between providers of loanable funds and firms best placed to use them. This column argues that a successful union would deliver...
This paper examines the concept of systemic risk and provides an intuitive account of the economic thought on systems and the development of the notion of systemic risk. It is illustrated by putting the ideas of system, systemic risk and endogenous...
We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged economy is asymptotically Walrasian in the sense that it converges to the equilibrium of an...
Financial market liquidity has become increasingly fragmented across multiple trading platforms. We propose an intuitive welfare-based market quality metric that can properly aggregate local market conditions across both securities and trading...
SRC researchers were involved in a study that explores how computer generated trading in financial markets will evolve over the next 10 years. The project was led by the Government Office for Science. The final project report can be found on the...