We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. We exploit loan-level data from the global syndicated lending market and US monetary policy surprises. When US policy tightens, nonbanks increase dollar credit supply to non-US firms (relative to...

Bank leverage ratios have made an impressive and largely unopposed return; they are mostly used alongside risk-weighted capital requirements. The reasons for this return are manifold, and they are not limited to the fact that bank equity levels in the wake of the global financial crisis (GFC)...

Relative performance evaluation (RPE) is, at least on paper, enjoying widespread popularity in determining the level of executive compensation. Yet existing empirical evidence of RPE is decidedly mixed. Two principal explanations are held responsible for this discord. A constructional challenge...

This paper analyzes the influence of market discipline on the risk-taking incentives of banks. It is shown that market discipline reduces risk if banks can credibly commit to a given level of risk before the interest rate on deposits is set. If, however, the bank can readjust the level of risk...

Every year over 20 states offer sales tax holidays (STHs) on specific items like clothes, shoes and other items to encourage consumption, effecting over 100 million consumers. We use a unique dataset of credit cards transaction to study the spending response to these holidays. Using a...

We examine the quantification of operational risk for banks. We adopt a financial-economics approach and interpret operational risk management as a means of optimizing the profitability of an institution along its value chain. We start by defining operational risk and then propose a...

In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected Shortfall with respect to portfolio allocation when netting between positions exists. As a particular case, we examine a simple Gaussian example in order to illustrate the impact of netting...

Like many financial contracts, derivatives are subject to default risk. A very popular mechanism in derivatives markets to mitigate the risk of non-performance on contracts is margining. By attaching collateral to a contract, margining supposedly reduces default risk. The broader impacts of the...

Economic cycles are the key credit portfolio risk driver and they are autocorrelated over time. We then show that it is economically meaningful to define risk for credit portfolios in a multi period setup. Since one period expected shortfall fails to measure risk adequately in a multi period...

We introduce an adaptive importance sampling method for the loss distribution of credit portfolios based on the Robbins-Monro stochastic approximation procedure. After presenting the subtle construction of the algorithm, we apply our adaptive scheme for calculating the risk figures of a typical...