The paper explores incentives created by the German Bank Restructuring Act for investors holding assets in systemically important banks (SIBs). Its purpose is to examine consequences that follow for risk choices of SIBs, as well as for Germany's financial system. Applying the analytical model of...

This paper provides market risk calculation for an equity-based trading portfolio. Instead of relying on the purely stochastic internal model method, which banks currently apply in line with the Basel regulatory requirements, we propose to include also alternative price mechanisms from the...

Why does the market discipline that banks face seem too weak during good times and too strong during bad times? This paper shows that using rollover risk as a disciplining device is effective only if all banks face purely idiosyncratic risk. However, if banks' assets are correlated, a two-sided...

This paper reveals and tests a new theoretical implication of the credit channel of monetary policy: as financial frictions (monitoring or auditing costs) increase, the reaction of stock prices to monetary policy shocks decreases. Correspondingly, towards the end of the Enron accounting scandal,...

Financial risk management is difficult at the best of times, but especially so in the presence of economic uncertainty and financial crises. The purpose of this special issue on "Advances in Financial Risk Management and Economic Policy Uncertainty" is to highlight some areas of research in...

In this paper, I extend the results of Moskowitz and Vissing-Jørgensen (2002) on the returns to entrepreneurial investments in the United States. First, following the authors' methodology I replicate the original findings from the Survey of Consumer Finances (SCF) for the period 1989 - 1998 and...

Foreign banks pulled signifi cant funding from their U.S. branches during the Great Recession. We estimate that the average-sized branch experienced a 12 percent net internal fund "withdrawal," with the fund transfer disproportionately bigger for larger branches. This internal shock to the...

In October 2006, Dominion Bond Rating Service (DBRS) introduced new ratings for banks that account for the potential of government support. The rating changes are not a reflection of any changes in the respective banks' credit fundamentals. We use this natural experiment to evaluate the...