Risk Models-at-Risk
The experience from the global financial crisis has raised serious concerns about the accuracy of standard risk measures as tools for the...
The new market-risk regulations
Basel III is coming into focus. The fundamental logic of the regulatory changes seems sensible, but the devil is in the detail – empirical...
Capital Structure and Investment Dynamics with Fire Sales
We study a general equilibrium model in which firms choose their capital structure optimally, trading off the tax advantages of debt against the risk...
Walrasian Foundations for Equilibria in Segmented Markets
We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged...
When to sell Apple and the NASDAQ? Trading bubbles with a stochastic disorder model
In this paper, the authors apply a continuous time stochastic process model developed by Shiryaev and Zhutlukhin for optimal stopping of random price...
Mark-to-Market Accounting and Systemic Risk: Evidence from the Insurance Industry
One of the most contentious issues raised during the recent crisis has been the potentially exacerbating role played by mark-to-market accounting...
Solvency II: Three principles to respect
The European legislation on prudential rules for insurance companies (Solvency II) is set for a final decision. It will be of fundamental importance...
Cyclical Adjustment of Capital Requirements: A Simple Framework
We present a model of an economy with heterogeneous banks that may be funded with uninsured deposits and equity capital. Capital serves to ameliorate...
Market Quality and Contagion in Fragmented Markets
Financial market liquidity has become increasingly fragmented across multiple trading platforms. We propose an intuitive welfare-based market quality...
Political challenges of the macroprudential agenda
Central banks frequently lead the macroprudential policy implementation. The hope is that their credibility in conquering inflation might rub off on...
Procyclical Leverage and Value-at-Risk
The availability of credit varies over the business cycle through shifts in the leverage of financial intermediaries. Empirically, we find that...
Global Financial Systems: Stability and Risk
The book uses economic theory, finance, mathematical modelling, risk theory, and policy to posit a comprehensive, coherent and current economic...
Iceland’s post-Crisis economy: A myth or a miracle?
Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked...
Capital controls are still ruining Iceland after half a decade
One aspect of the Cypriot crisis resolution is of particular concern. As authorities fear that anyone with money in Cyprus will want to take it out as...
The capital controls in Cyprus and the Icelandic experience
Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s...
Towards a more procyclical financial system
Is the fact that different banks have different risk models problematic? Contrary to the Basel Committee and the European Banking Authority, this...
