Using the announcement of the first Greek bailout on April 11, 2010, we quantify significant spillover effects from sovereign to corporate credit risk in Europe. A ten percent increase in sovereign credit risk raises corporate credit risk on average by 1.1 percent after the bailout. These...

This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies between banks’ equity prices. We use new tools available from multivariate extreme value theory to estimate individual banks’ exposure to each other (“contagion risk”) and...

A standard repurchase agreement between two counterparties is considered to examine the endogenous choice of collateral assets, the feasibility of secured lending, and welfare implications of the central bank’s collateral framework. As an important innovation, we allow for two-sided...

Banks typically determine their capital levels by separately analysing credit and interest rate risk, but the interaction between the two is significant and potentially complex. We develop an integrated economic capital model for a banking book where all exposures are held to maturity. Our...

A standard repurchase agreement between two counterparties is considered to examine the endogenous choice of collateral, the feasibility of secured lending, and welfare implications of the central bank's collateral framework. As an innovation, we allow for two-sided counterparty risk. In line...

This paper proposes a set of indicators relevant for the risk characteristics of covered bonds, as based on granular publicly available transparency data. The indicators capture various aspects of cash flow risks related to the issuer, the cover pool and the payment structure. They offer unified...

We address the question to what extent a central bank can de-risk its balance sheet by unconventional monetary policy operations. To this end, we propose a novel risk measurement framework to empirically study the time-variation in central bank portfolio credit risks associated with such...

Macroprudential policymakers assess medium-term downside risks to the real economy arising from financial imbalances and implement policies aimed at managing those risks. In doing so, they face an inherent intertemporal trade-off between the expected growth and downside risks. This paper reviews...

This paper proposes an approach to estimate the impact of adverse climatic events on the profitability of small European banks (LSIs). By considering river flooding phenomena, we construct a unique database matching the information on location, frequency and severity of floods with the location...

Mortgages constitute the largest part of household debt. An essential choice when taking out a mortgage is between fixed-interest-rate mortgages (FRMs) and adjustable-interest-rate mortgages (ARMs). However, so far, no comprehensive cross-country study has analyzed what determines household...