The goal of integrated risk management in a financial institution is to measure and manage risk and capital across a range of diverse business activities. This requires an approach for aggregating risk types (market, credit, and operational) whose distributional shapes vary considerably. In this...

We conduct a systematic comparison of confidence intervals around estimated probabilities of default (PD), using several analytical approaches from large-sample theory and bootstrapped small-sample confidence intervals. We do so for two different PD estimation methods

We estimate the equity risk premium (ERP) by combining information from twenty models. The ERP in 2012 and 2013 reached heightened levels - of around 12 percent - not seen since the 1970s. We conclude that the high ERP was caused by unusually low Treasury yields.

This paper explores financial stability policies for the shadow banking system. I tie policy options to economic mechanisms for shadow banking that have been documented in the literature. I then illustrate the role of shadow bank policies using three examples: agency mortgage real estate...

This paper considers the problem of information acquisition in an intermediated market, where the specialists have access to superior technology for acquiring information. These informational advantages of specialists relative to households lead to disagreement between the two groups, changing...

We document the cyclical properties of the balance sheets of different types of intermediaries. While the leverage of the bank sector is highly procyclical, the leverage of the nonbank financial sector is acyclical. We propose a theory of a two-agent financial intermediary sector within a...

This paper provides a model of systemic panic among financial institutions with heterogeneous fragilities. Concerns about potential spillovers from each other generate strategic interaction among institutions, triggering a preemption game in which one tries to exit the market before the others...

I establish that inflation risk is priced in the cross section of stock returns: Stocks that have low returns during inflationary times command a risk premium. I estimate a market price of inflation risk that is comparable in magnitude to the price of risk for the aggregate market. Inflation is...

We provide an overview of the rapidly evolving literature on shadow credit intermediation. The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack...

We provide a framework for monitoring the shadow banking system. The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources...