The commercial real estate market is pro-cyclical. This feature, together with the relative size of the industry and the large capital inflows, has made this sector relevant for financial stability. Using a novel loan level data set covering the commercial real estate portfolios of Dutch banks...

This paper argues that a special bank bankruptcy regime is desirable for the efficient restructuring and/or liquidation of distressed banks. We first explore the principal features of corporate bankruptcy law. Next, we examine the specific characteristics that distinguish banks from other...

The media influence our perception of reality and, since we act on those perceptions, reality is in turn affected by the media. News is a rich source of information, but, in addition, the sentiment (i.e., the tone of financial news) tells us how others perceive the financial system and how that...

This paper investigates the maximum entropy method for estimating the option implied volatility, skewness and kurtosis. The maximum entropy method allows for non-parametric estimation of the risk neutral distribution and construction of confidence intervals around the implied volatility....

This paper investigates the prediction of Value-at-Risk (VaR) using option-implied information obtained by the maximum entropy method. The maximum entropy method provides an estimate of the risk-neutral distribution based on option prices. Besides commonly used implied volatility, we obtain...

This study presents a core-periphery model to determine the optimal size of the European Stability Mechanism (ESM), building on Jeanne and Ranciere (2011). While the periphery is subject to a probability of losing access to external credit, the core's incentive for setting up an ESM stems...

Liquidity stress constitutes an ongoing threat to financial stability in the banking sector. A bank that manages its liquidity inadequately might find itself unable to meet its payment obligations. These liquidity issues, in turn, can negatively impact the liquidity position of many other banks...

We conduct a laboratory experiment to examine under which circumstances a depositor-run at one bank may lead to a depositor-run at another bank. We implement two-person coordination games which capture the essence of the Diamond-Dybvig (1983) bank-run model. Subjects in the roles of followers...

How would a central bank digital currency impact the balance sheets of the central bank and commercial banks? To tackle this question empirically, we propose a constraint optimisation model that allows individual banks to choose how to respond to deposit outflows, minimizing their costs subject...

Against the background of the great financial crisis, this paper assesses the merits of bank-based versus market-based financing by exploring the relationship between financial structure and systemic risk. The findings indicate that bank-based financial structures are associated with higher...