Probability of default (PD) measures have been widely used in estimating potential losses of, and contagion among, large financial institutions. In a period of financial stress however, the existing methods to compute PDs and generate loss estimates may vary significantly. This paper discusses...

Changes to the regulatory system introduced after the financial crisis include not only mandatory clearing of OTC derivatives at central counterparties and margining of uncleared derivatives, but also prudential measures, including notably a 'Liquidity Coverage Ratio' which obliges firms to set...

Recent financial crises including the ongoing one caused by the COVID-19 pandemic have consistently drawn attention to the need to strengthen the quality of public debt management in emerging markets and developing countries. Deeper and more efficient domestic government debt markets-being, a...

Back in 2009, G-20 leaders have called for all standardized over-the-counter (OTC) derivatives to be cleared through central counterparties (CCPs). By now, 18 of the 24 Financial Stability Board (FSB) member jurisdictions have provided for mandatory central clearing frameworks in place, covering...

This paper analyzes whether and how central banks can use currency options to lower exchange rate volatility and maintain (implicit) target zones in foreign exchange markets. It argues that selling rather than buying options will result in market makers dynamically hedging their long option...

In this paper, we develop a model incorporating the impact of financial inclusion to study the implications of introducing a retail central bank digital currency (CBDC). CBDCs in developing countries (unlike in advanced countries) have the potential to bank large unbanked populations and boost...

Policymakers across countries have been seeking to strengthen the institutional framework to control fiscal costs and feedback effects to the real economy generated by bank failures. On a cross-section of countries, we find evidence that suggests that bank supervisors’ intervention in bank...

We test whether foreign demand matters for local house prices in the US using an identification strategy based on the existence of 'home bias abroad' in international real estate markets. Following an extreme political crisis event abroad, a proxy for a strong and exogenous shift in foreign...

We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase Programme at the security level. Our empirical analysis shows that euro area investors (in particular investment funds and households) actively rebalanced away from securities targeted under the Public Sector...

In contrast to the early-warning system literature, we find that currency and debt crises are not closely linked in emerging markets. We find that after 1994, credit ratings predict debt crises but fail to anticipate currency crises. When debt crises are defined as sovereign distress - when...