Moral Hazard and Debt Maturity
We present a model of the maturity of a bank’s uninsured debt. The bank borrows funds and chooses afterwards the riskiness of its assets. This moral...
Model risk and the implications for risk management, macroprudential policy, and financial regulations
Risk forecasting is central to financial regulations, risk management, and macroprudential policy. This column raises concerns about the reliance on...
How to lose money in derivatives: examples from hedge funds and bank trading departments
What makes futures hedge funds fail? The common ingredient is over betting and not being diversified in some bad scenarios that can lead to disaster...
The Economics of Collateral
In this paper we study how the use of collateral is evolving under the influence of regulatory reform and changing market structure. We start with a...
Model Risk of Risk Models
This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models...
Diversification and Financial Stability
This paper contributes to a growing literature on the pitfalls of diversification by shedding light on a new mechanism under which, full risk...
Walrasian foundations for equilibria in segmented markets
Mathematics and Financial Economics, Volume 8, pages 249–264.
A Proposal for an Open-Source Financial Risk Model
This paper presents a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global...
Systems and Systemic Risk in Finance and Economics
This paper examines the concept of systemic risk and provides an intuitive account of the economic thought on systems and the development of the...
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...
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...
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...
