With this paper we seek to contribute to the literature on pension insurance systems. The financial literature tends to focus exclusively on the US pension insurance system. This is the first major empirical study to address the German occupational pension insurance (PSVaG) plan in Germany. The...

With a sample of twelve US bond indices spanning different maturities, credit ratings and industry sectors, we investigate the impact of new bank capital regulation for trading portfolios introduced by Basel III. Specifically, we estimate the new capital requirements for (a) liquidity risk and...

By employing Moody‘s corporate default and rating transition data spanning the last 90 years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we shall focus on the worst case scenario over the...

We study the optimal design of clearing systems. We analyze how counterparty risk should be allocated, whether traders should be fully insured against that risk, and how moral hazard affects the optimal allocation of risk. The main advantage of centralized clearing, as opposed to no or...

Since 2008, catastrophic losses and financial turmoil have deeply shaken the insurance and reinsurance industries. Severe difficulties encountered by sector leaders like AIG and Swiss Re have shed light on the potential fragility of the players, and have increased attention on the subject of...

This paper illustrates channels by which regulations that require banks to hold liquid assets can either increase or decrease a bank's incentive to take risk with its remaining ineligible assets. A greater capacity to respond to liquidity stress increases the potential profits a bank would put...

This study investigates whether banks and insurance corporations perform regulatory arbitrage by buying bonds with inflated credit ratings. We argue that credit rating based capital requirements incentivize banks and insurance corporations to hold more bonds with inflated credit ratings. We...

This study shows that the statistical property of the commercial banks' rate of returns can be used to explain the resistance to using Value-at-risk (VaR) and stress tests to determine banks' capital adequacy. We showed that “fat-tail” risk requires more capital than the “normal tail”...

Using information on mortgages insured by the Federal Housing Administration, this article examines the disproportionate decline in collateral values associated with reverse mortgages. Properties securing reverse mortgages sell at a sharp discount in foreclosure relative to similar properties...

As a result of Solvency II, academics and practitioners anticipate further consolidation in the insurance industry as the new regulatory framework rewards well-diversified insurers with lower capital requirements and challenges smaller insurers to meet the (operational) regulatory requirements....