What do academics have to offer market risk management practitioners in financial institutions? Current industry practice largely follows one of two extremely restrictive approaches: historical simulation or RiskMetrics. In contrast, we favor flexible methods based on recent developments in...

Since almost eliminating net debt, the Australian Government%u2019s attention has turned to the financing of broader balance sheet liabilities, such as public sector superannuation. Australia will be developing a significant financial asset portfolio in the %u2018Future Fund%u2019 to smooth the...

Managers' incentives may conflict with those of shareholders or creditors, particularly at leveraged, opaque banks. Bankers may abuse their control rights to give themselves excessive salaries, favored access to credit, or to take excessive risks that benefit themselves at the expense of...

Activities of international banks have been at the core of discussions on the causes and effects of the international financial crisis. Yet we know little about the actual magnitudes and mechanisms for transmission of liquidity shocks through international banks, including the reasons for...

We propose a novel mechanism, “financial dampening,” whereby loan retrenchment by banks attenuates the effectiveness of monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank holding companies (BHCs). We derive an...

Management risk occurs when uncertainty about future managerial decisions increases a firm's overall risk. This paper argues that management risk is an important yet unexplored determinant of a firm's default risk and the pricing of its debt. CDS spreads, loan spreads and bond yield spreads all...