The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk … assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited … liability. When capital raising is costly, poorly capitalized banks may limit risk to avoid breaching the minimal capital ratio …

The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk … assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited … liability. When capital raising is costly, poorly capitalized banks may limit risk to avoid breaching the minimal capital ratio …

Using a unique and comprehensive dataset, this paper develops and uses three distinct methods to quantify the risk of a … estimates suggest that systemic risk is limited even during major financial crises. For example, maximum likelihood estimation … probability of systemic failure. Third, we also obtain estimates of systemic risk implied by equity option prices of U.S. and …

argue that the risk-free rate should be used for discounting when assessing and comparing the cost of energy across …