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Adrian, Tobias; Brunnermeier, Markus K. - 2008

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

Persistent link: https://www.econbiz.de/10010287112

Rediscounting under aggregate risk with moral hazard

Chapman, James T. E.; Martin, Antoine - 2007

. Freeman’s conclusion that the central bank should absorb losses related to default to provide risk-sharing goes against the …. With moral hazard, the central bank should avoid absorbing losses, contrary to Freeman’s argument. However, we show that … optimal policy would be for the central bank to make a restricted number of creditors compete for funds. By restricting the …

Persistent link: https://www.econbiz.de/10010283326

Hedge funds, financial intermediation, and systemic risk

Kambhu, John; Schuermann, Til; Stiroh, Kevin J. - 2007

Hedge funds are significant players in the U.S. capital markets, but differ from other market participants in important ways such as their use of a wide range of complex trading strategies and instruments, leverage, opacity to outsiders, and their compensation structure. The traditional bulwark...

Persistent link: https://www.econbiz.de/10010283433

Credit derivatives and bank credit supply

Hirtle, Beverly - 2007

with an increase in bank credit supply. We find evidence that greater use of credit derivatives is associated with greater … supply of bank credit for large term loans—newly negotiated loan extensions to large corporate borrowers—though not for …

Persistent link: https://www.econbiz.de/10010283448

Understanding the securitization of subprime mortgage credit

Ashcraft, Adam B.; Schuermann, Til - 2008

In this paper, we provide an overview of the subprime mortgage securitization process and the seven key informational frictions that arise. We discuss the ways that market participants work to minimize these frictions and speculate on how this process broke down. We continue with a complete...

Persistent link: https://www.econbiz.de/10010283528

Financial intermediary leverage and value-at-risk

Adrian, Tobias; Shin, Hyun Song - 2008

We study a contracting model of leverage and balance sheet size for financial intermediaries that fund their activities through collateralized borrowing. Leverage and balance sheet size increase together when measured risks decrease. When the loss distribution is exponential, the behavior of...

Persistent link: https://www.econbiz.de/10010283543

Dynamic effects of credit shocks in a data-rich environment

Boivin, Jean; Giannoni, Marc P.; Stevanovi´c, Dalibor - 2013

We examine the dynamic effects of credit shocks using a large data set of U.S. economic and financial indicators in a structural factor model. The identified credit shocks, interpreted as unexpected deteriorations of credit market conditions, immediately increase credit spreads, decrease rates...

Persistent link: https://www.econbiz.de/10010333628

Payment size, negative equity, and mortgage default

Fuster, Andreas; Willen, Paul S. - 2012

Surprisingly little is known about the importance of mortgage payment size for default, as efforts to measure the treatment effect of rate increases or loan modifi cations are confounded by borrower selection. We study a sample of hybrid adjustable-rate mortgages that have experienced large rate...

Persistent link: https://www.econbiz.de/10010333591

When is there a strong transfer risk from the sovereigns to the corporates?

Bai, Jennie; Wei, Shang-jin - 2012

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason why international investment in private companies has to take into account the sovereign risk. But the likelihood of sovereign risk transferring to corporates and...

Persistent link: https://www.econbiz.de/10010333592

Banks, markets, and efficiency

Fecht, Falko; Martin, Antoine - 2005

not sufficiently restrain monopoly rents already. Thus, our results suggest that in Germany's bank-dominated financial …

Persistent link: https://www.econbiz.de/10010283333