This paper takes the view that a major contributing factor to the financial crisis of 2008 was a failure to correctly … 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 …

The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite … played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the … shocks have had a more severe impact on advanced economies, it was mainly the decline in risk appetite that affected emerging …

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to … pessimistic about other asset classes as well. This means that idiosyncratic risk can create contagion and snowball into systemic … risk. Furthermore, in a Diamond and Dybvig (1983) setting, we show that, surprisingly, uncertainty aversion causes …

remained close to zero for many decades, but spiked for a short period during the most recent financial crisis, the Great …-value stocks. This helps to explain the cross section of asset returns when risk is priced according to a version of the "Bad Beta …

of the modern business cycle: financial-crisis recessions are more costly than normal recessions in terms of lost output …

We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy … two-way feedback between financial and sovereign credit risk using data on the credit default swaps (CDS) of the Eurozone …, the latter being consistent with an effect of the quality of sovereign guarantees on bank credit risk. …

This article presents an application of extreme value theory to compute the value at risk of a market position. In … to compute the VaR of a position decomposed on risk factors. …

flows. This is based on a simple taxonomy that enables us to break down the origin of crises into three components: a crisis … of confidence (spreads and currency crisis), a crisis of fundamentals (real growth rate), and a crisis of economic policy … illuminates the potential role of collective action clauses (CACs) in eliminating the risk of self-fulfilling debt crises. …

earlier studies, global factors, such as commodity prices, international interest rates, and growth in the world’s largest …