We identify and track over time the factors that make the financial system vulnerable to fire sales by constructing an index of aggregate vulnerability. The index starts increasing quickly in 2004, before most other major systemic risk measures, and triples by 2008. The fire-sale-specific...

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of the financial system conditional on institutions being in distress. We define an institution's contribution to systemic risk as the difference between CoVaR conditional on the institution being in distress and CoVaR in the...

This paper explores the advantages of a new financial charter for large, complex, internationally active financial institutions that would address the corporate governance challenges of such organizations, including incentive problems in risk decisions and the complicated corporate and...

Which markets do institutions use to change exposure to credit risk? Using a unique data set of transactions in corporate bonds and credit default swaps (CDS) by large financial institutions, we show that simultaneous transactions in both markets are rare, with an average institution having an...

The financial crisis of 2007-09 has sparked keen interest in models of financial frictions and their impact on macro activity. Most models share the feature that borrowers suffer a contraction in the quantity of credit. However, the evidence suggests that although bank lending contracted during...

We provide an overview of the data requirements necessary to monitor repurchase agreements (repos) and securities lending markets for the purposes of informing policymakers and researchers about firm-level and systemic risk. We start by explaining the functioning of these markets, then argue...

This paper, originally released in August 1989 as part of a Federal Reserve Bank of New York series on the U.S. securities markets, examines loans of Treasury and agency securities in the domestic market. It highlights some important institutional characteristics of securities loan transactions,...

This paper examines the evolution of risk in the U.S. financial sector using firm-level equity market data from 1975 to 2005. We find that over the past three decades, financial sector volatility has steadily increased, particularly from 1998 to 2002. Increased volatility, driven by common...

We employ a model of leverage-induced explosive behavior in financial markets to develop a measure of financial market instability. Specifically, we derive a quantitative condition for how large levered investors can become relative to the whole market before the demand curve for securities...

In a financial system in which balance sheets are continuously marked to market, asset price changes appear immediately as changes in net worth, eliciting responses from financial intermediaries who adjust the size of their balance sheets. We document evidence that marked-to-market leverage is...