Starting from the perspective of heterodox Keynesian-Minskyian-Kindlebergian financial economics, this paper begins by highlighting a number of mechanisms that contributed to the current financial crisis. These include excess liquidity, income polarisation, conflicts between financial and...

In light of recent regulatory initiatives focusing on fair treatment of customers in financial markets, this paper examines the agency problem created by an asset manager with market impact, segregated accounts and preference-based contracts. It illustrates how aggregate client welfare and...

This paper examines the existence of market discipline in the banking industries of Argentina, Chile, and Mexico during the 1980s and 1990s. Using a bank panel data set, we test for the presence of market discipline by studying whether depositors punish risky banks by withdrawing their deposits....

We develop a framework for modelling conditional loss distributions through the introduction of risk factor dynamics. Asset value changes of a credit portfolio are linked to a dynamic global macroeconometric model, allowing macro effects to be isolated from idiosyncratic shocks. Default...

We build a compact global macroeconometric model capable of generating point and density forecasts for a core set of macroeconomic factors using recent advances in the analysis of cointegrating systems. We do so for a set of countries/regions and explicitly allow for interdependencies that exist...

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the...

This paper examines the drivers behind revenues of merchant electricity interconnectors and the effect of arbitrage trading over interconnectors on the level and volatility of electricity prices in the connected markets. It sets out a simulation methodology that allows the stochastic and...

The concept of rational performance-chasing equilibrium in recent literature is supported neither by theory nor by empirical evidence. A more accurate model of such market dynamics is based on investor confusion, which is partly driven by some active managers' performance manipulation. Unlike...

Rational herd behavior and informationally efficient security prices have long been considered to be mutually exclusive but for exceptional cases. In this paper we describe the conditions on the underlying information structure that are necessary and sufficient for informational herding and...

This paper presents a canonical, econometric model of contagion and investigates the conditions under which contagion can be distinguished from inter-dependence. In a two-country (market) set-up it is shown that for a range of fundamentals the solution is not unique, and for sufficiently large...