contingent capital proposed in the literature, the COERC is less risky in a world where bank assets can experience sudden jumps …

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 …

their risk assessments and outcomes to those from a simple methodology that relies on publicly available market data and … market data; (iii) This discrepancy arises due to the reliance on regulatory risk weights in determining required levels of … capital once stress-test losses are taken into account. In particular, the continued reliance on regulatory risk weights in …

focus on individual, rather than systemic, risk of financial institutions. Focusing on systemically important assets and … capable of inducing market discipline and mitigating moral hazard, but also capable of addressing the associated systemic risk …, for instance, due to the risk of fire sales of collateral assets. Furthermore, because of our focus on SIALs, our proposed …

their risk assessments and outcomes to those from a simple methodology that relies on publicly available market data and …) This discrepancy arises due to the reliance on regulatory risk weights in determining required levels of capital once … stress-test losses are taken into account. In particular, the continued reliance on regulatory risk weights in stress tests …

individual institutions to the risk in the system. Although the threat index and the default level of a bank both reflect some …

government. The risk to taxpayers from this investment would be acceptable, however, once the banks are freed from toxic assets … addition, the risk of moral hazard is curtailed. The comparison of the proposed design with the bad bank plan of the German …