We propose a simple network–based methodology for ranking systemically important financial institutions. We view the risks of firms –including both the financial sector and the real economy– as a network with nodes representing the volatility shocks. The metric for the connections of the...

CoCo’s (contingent convertible capital) are designed to convert from debt to equity when banks need it most. Using a Diamond-Dybvig model cast in a global games framework, we show that while the CoCo conversion of the issuing bank may bring the bank back into compliance with capital...

During the Global Financial Crisis, regulators imposed short-selling bans to protect financial institutions. The rationale behind the bans was that “bear raids”, driven by short-sellers, would increase the individual and systemic risk of financial institutions, especially for institutions...

Recent empirical evidence suggests that financial networks exhibit a core periphery network structure. This paper aims at giving an economic explanation for the emergence of such a structure using network formation theory. Focusing on intermediation benefits, we find that a core periphery...

Most stock exchange regulators around the world reacted to the 2007-2009 crisis byimposing bans or regulatory constraints on short-selling. Short-selling restrictions wereimposed and lifted at different dates in different countries, often applied to different sets ofstocks and featured different...

The ING Illiquid Assets Back-up Facility announced January 2009 was a SWAP-based insurance to reduce ING’s exposure to Alt-A related risk. Did the deal involve state aid? Usingmarketprices to evaluate the SWAP directly is impossible because markets for Alt-A based CDOs had collapsed. We...

A banking union limits international bank default contagion, eliminating inefficient liquidations. For particularly low short term returns, it also stimulates interbank flows. Both effects improve welfare. An undesirable effect arises for moderate moral hazard, as the banking union encourages...

We exploit the introduction of free banking laws in US states during the 1837-1863 period to examine the impact of removing barriers to bank entry on bank competition and economic growth. As governments were not concerned about systemic stability in this period, we are able to isolate the...

In this paper, we develop a new capital adequacy buffer model (CABM) which is sensitive to dynamic economic circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel combination of the Merton structural model which measures...

We develop a novel high-dimensional non-Gaussian modeling framework to infer conditional and joint risk measures for many financial sector firms. The model is based on a dynamic Generalized Hyperbolic Skewed-t block-equicorrelation copula with time-varying volatility and dependence parameters...