In this paper we consider the relative merits of net versus gross settlement of interbank payments. Net settlement economizes on the costs of holding non-interest-bearing reserves but increases moral hazard problems. The "put option" value of default under net settlement can also distort banks'...

Households and businesses in the United States prefer to use check payment over less costly, electronic means of payment. Earlier studies have focused on check "float," that is, the time lag between receipt and clearing, as a potential explanation for the continued popularity of checks. An...

In this paper we formulate and test a number of hypotheses regarding insurer participation and volume decisions in derivatives markets. Several specific hypotheses are supported by our analysis. We find evidence consistent with the idea that insurers are motivated to use financial derivatives to...

We measure the welfare consequences of endogenous quality choice in imperfectly competitive markets. We introduce the concept of a "quality markup" and measure the relative welfare consequences of market power over price and quality. For U.S. paid-television markets during 1997-2006, we find...

This paper builds a new model of financial exchange competition, tailored to the institutional details of the modern US stock market. In equilibrium, exchange trading fees are competitive but exchanges are able to earn economic profits from the sale of speed technology. We document stylized...

We estimate a large Bayesian time-varying parameter vector autoregressive (TVP-VAR) model of daily stock return volatilities for 35 U.S. and European financial institutions. Based on that model we extract a connectedness index in the spirit of Diebold and Yilmaz (2014) (DYCI). We show that the...

This paper presents an analysis of the volatility connectedness of major bank stocks in the South East Asia (SEACEN) region between 2004 and 2016. Applying the Diebold-Yilmaz Connectedness Index (DYCI) framework to daily stock return volatilities of major banks in the region, we obtain results...

This paper examines the impact of bank heterogeneity on the assessment of systemic risk in the context of the German banking sector. Precisely, it is questioned whether currently employed systemic risk indicators are able to account for banks' heterogeneity and to signal systemic risk reliably...

We evaluate the abnormal returns of issuing and non-issuing banks around the announcement of Seasoned Equity Offerings (SEOs) and explore how the market reaction is influenced by aggregate systemic conditions and by the systemic risk contribution and exposure of banks. While we find evidence of...

This paper investigates a model of strategic interactions in financial networks, where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution...