The equity of too-big-to-fail banks could be deemed less risky due to implicit government guarantees. However, such guarantees could also amplify a moral hazard problem that induces large banks to take excessive risk. If such risk is mispriced by the market due to the increased complexity of...

Regulations leading up to the financial crisis of 2007-2009 provided incentives for banks shift their risk profiles toward less regulated areas. We focus on the case of operational risk which went from being a relatively benign and largely unregulated risk type to a major risk that now accounts...