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Thawing Frozen Capital Markets and Backdoor Bailouts : Evidence from the Fed's Liquidity Programs
Boyson, Nicole M. - 2015
During the subprime crisis, the Federal Reserve introduced several emergency liquidity programs as supplements to the discount window: TAF, PDCF, and TSLF. Using data on loans to large commercial banks and primary dealers, we find that the programs were used by relatively few institutions and...
Persistent link: https://www.econbiz.de/10013032412
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Bailout Uncertainty in a Microfounded General Equilibrium Model of the Financial System
Cukierman, Alex - 2011
lenders' beliefs about the probability of bailout. Events like Lehman's collapse are conceived of as ”black swan” events that … led lenders to put a positive mass on bailout probabilities that were previously assigned zero mass.Results of the … analysis include: (i) An unanticipated increase in bailout uncertainty raises interest rates, the volume of defaults in both …
Persistent link: https://www.econbiz.de/10013122330
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Stress scenarios from the tails of historical distributions of macro-financial risk factors in Denmark
Abildgren, Kim - 2013
The paper puts the outcome during the most recent financial crisis in a historical perspective by taking a closer look at the frequency of extreme events in the economic history of Denmark, in some cases based on time series back to the late 1600s. We focus on the frequency distribution of a...
Persistent link: https://www.econbiz.de/10010199517
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The Riskiness of Credit Allocation and Financial Stability
Brandao-Marques, Luis - 2019
We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...
Persistent link: https://www.econbiz.de/10012859862
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Systemic risk and the refinancing ratchet effect
Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C. - 2009 - This draft: September 13, 2009
The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...
Persistent link: https://www.econbiz.de/10003889053
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Federal reserve policies and financial market conditions during the crisis
Brave, Scott A.; Genay, Hesna - 2011
During the recent financial crisis, the Federal Reserve implemented a series of extraordinary and unconventional policies to alleviate the impact of the crisis on financial markets and the economy. In this paper, we examine the effects of these policies on broad financial market conditions,...
Persistent link: https://www.econbiz.de/10009010671
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Quantifying contagion risk in funding markets : a model-based stress-testing approach
Anand, Kartik; Gauthier, Céline; Souissi, Moez - 2015
We propose a tractable, model-based stress-testing framework where the solvency risks, funding liquidity risks and market risks of banks are intertwined. We highlight how coordination failure between a bank's creditors and adverse selection in the secondary market for the bank's assets interact,...
Persistent link: https://www.econbiz.de/10011304764
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Interbank funding as insurance mechanism for (persistent) liquidity shocks
Bluhm, Marcel - 2015
The interbank market is important for the efficient functioning of the financial system, transmission of monetary policy and therefore ultimately the real economy. In particular, it facilitates banks' liquidity management. This paper aims at extending the literature which views interbank markets...
Persistent link: https://www.econbiz.de/10011434764
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Asset encumbrance, bank funding and financial fragility
Ahnert, Toni; Anand, Kartik; Gai, Prasanna; Chapman, James - 2016
How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt...
Persistent link: https://www.econbiz.de/10011486236
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Capturing information contagion in a stress-testing framework
Anand, Kartik; Gauthier, Céline; Gai, Prasanna; … - 2016
We develop an operational model of information contagion and show how it may be integrated into a mainstream, top-down, stress-testing framework to quantify systemic risk. The key transmission mechanism is a two-way interaction between the beliefs of secondary market investors and the...
Persistent link: https://www.econbiz.de/10011520642