The paper studies risk mitigation associated with capital regulation, in a context where banks may choose tail risk … assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited … liability. Moreover, higher capital may have an unintended e¤ect of enabling banks to take more tail risk without the fear of …

assess and price the risk of default. In order to analyse default risk in the macroeconomy, a simple general equilibrium … model with banks and financial intermediation is constructed in which default-risk can be priced. It is shown how the credit … spread can be attributed largely to the risk of default and how excess loan creation may emerge due different attitudes to …

The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite … shocks have had a more severe impact on advanced economies, it was mainly the decline in risk appetite that affected emerging … within types of economies, with Europe being more adversely affected by the fall in risk appetite than other advanced …

implied correlation based on portfolio downside risk measures that does not suffer from this bias. These unbiased quantile … correlation estimates are directly applicable to portfolio optimization and to risk management techniques in general. This simple …

The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between … high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also … returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a …

We conduct a theoretical and empirical investigation of the impact of bankruptcy codes on firms’ capital …-structure choices. In our theoretical framework, costs of financial distress are endogenously determined as a function of the bankruptcy … code. Anticipated liquidation values emerge as the key variable in the capital structure-bankruptcy code link: among other …

future volatility and as a result estimate Value-at-Risk (VaR) several days ahead and compare it to the RiskMetricsTM (1996 …

type of models often leads to too extreme VaR-estimates, whereas the latter type underestimates the risk in case of extreme …