We examine the coexistence of banks and financial markets, studying a credit market where the qualities of investment projects are not observable and the investment decisions of entrepreneurs are not contractible. Standard banks can alleviate moral-hazard problems by securing a portion of a...

We propose the realized systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we...

We propose a methodology for forecasting the systemic impact of financial institutions in interconnected systems. Utilizing a five-year sample including the 2008/9 financial crisis, we demonstrate how the approach can be used for timely systemic risk monitoring of large European banks and...

We propose the systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we define...

We propose a semiparametric measure to estimate systemic interconnectedness across financial institutions based on tail-driven spill-over effects in a ultra-high dimensional framework. Methodologically, we employ a variable selection technique in a time series setting in the context of a...

We analyze the profitability of government-owned banks’ lending to their owners, using a unique data set of relatively homogeneous government-owned banks; the banks are all owned by similarly structured local governments in a single country. Making use of a natural experiment that altered the...

Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in our stochastic simulation framework...

Lack of transparency in securitization transactions significantly contributed to the severe financial crisis of 2007–2009. To increase transparency we propose a new mechanism: financial claims with fingerprints. They would allow market participants at each stage of the securitization process...

At the peak of the financial crisis in October 2008, the IASB amended IAS 39 to grant companies the option of abandoning fair value recognition for selected financial assets. Using a comprehensive global sample of publicly listed IFRS banks, we find that banks use the reclassification option to...

Using the model of Rochet and Vives (2004), this note shows that a prudential regulator can in general not mitigate a bank’s failure risk solely by means of liquidity requirements. However, their effectiveness can be restored if, in addition, minimum capital requirements are met. This provides...