The cost of bank funding on money markets is typically the sum of a risk-free rate and a spread that reflects rollover risk, i.e., the risk that banks cannot roll over their short-term market funding. This risk is a major concern for policymakers, who need to intervene to prevent the funding...

We investigate the impact of the 2014 Interagency Clarification on the leverage risk premium for bank- and nonbank-originated loans. Using a novel dataset from 2011 to 2019, we show that leveraged loan spreads have declined rapidly for nonbank facilities relative to bank facilities since the...

We use BERT, an AI-based algorithm for language understanding, to decipher regulatory climate-risk disclosures and measure their impact on the credit default swap (CDS) market. Risk disclosures can either increase or decrease credit spreads, depending on whether disclosure reveals new risks or...

We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of surplus-invariant acceptance sets. These are characterized by the...