We propose two indicators for quantifying the potential exposure of financial institutions to indirect contagion arising from deleveraging of assets in stress scenarios. The first indicator, the Endogenous Risk Index (ERI) captures spillovers across portfolios arising from deleveraging in stress...

We propose a systematic algorithmic reverse-stress testing methodology to create ``worst case" scenarios for regulatory stress tests by accounting for losses that arise from distressed portfolio liquidations. First, we derive the optimal bank response for any given shock. Then, we introduce an...

We build a framework for modelling fire sales where banks face both liquidity and solvency constraints and choose which assets to sell in order to minimise liquidation losses. Banks constrained by the leverage ratio prefer to first sell assets that are liquid and held in small amounts, while...

Despite substantial regulatory reforms, MMFs exposed to private assets experienced severe stress in March 2020. In the EU, Low Volatility Net Asset Value (LVNAVs) MMFs faced acute challenges to meet regulatory requirements while facing high redemptions. Such funds have to maintain their...