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Perotti, Enrico C.; Matta, Rafael - 2015 - This Draft: March 16, 2015

Does demand for safety create instability ? Secured (repo) funding can be made so safe that it never runs, but shifts …. As more secured debt causes larger fire sales, it leads to higher haircuts which further increase the frequency of runs …. While secured funding combined with high yield unsecured debt may reduce instability, the private choice of repo funding …

Persistent link: https://www.econbiz.de/10010492342

Shadow banking : financial intermediation beyond banks

Adrian, Tobias; Chrétien, Edouard; Chui, Michael; … - Shadow Banking: Financial Intermediation beyond Banks …; … - 2018

Persistent link: https://www.econbiz.de/10011790739

Optimal bank regulation in the presence of credit and run risk

Kashyap, Anil K.; Tsomocos, Dimitrios P.; Vardoulakis, … - 2017

We modify the Diamond and Dybvig (1983) model of banking to jointly study various regulations in the presence of credit and run risk. Banks choose between liquid and illiquid assets on the asset side, and between deposits and equity on the liability side. The endogenously determined asset...

Persistent link: https://www.econbiz.de/10011803125

Interbank credit exposures and financial stability

Schneorson, Oren - 2022

This paper investigates how interbank credit exposures affect financial stability. Policy makers often see such exposures as undermining stability by exacerbating cascading losses through the financial system. I develop a model that features a trade-off between cascading losses and risk-sharing....

Persistent link: https://www.econbiz.de/10013350529

Regulation, credit risk transfer, and bank lending

Pausch, Thilo; Welzel, Peter - 2011

We integrate Basel II (and III) regulations into the industrial organization approach to banking and analyze lending behavior and risk sensitivity of a risk-neutral bank. The bank is exposed to credit risk and may use credit default swaps (CDS) for hedging purposes. Regulation is found to induce...

Persistent link: https://www.econbiz.de/10010291748

Estimating Bilateral Exposures in the German Interbank Market: Is there a Danger of Contagion?

Upper, Christian; Worms, Andreas - 2002

Credit risk associated with interbank lending may lead to domino effects, where the failure of one bank results in the failure of other banks not directly affected by the initial shock. Recent work in economic theory shows that this risk of contagion depends on the precise pattern of interbank...

Persistent link: https://www.econbiz.de/10010295726

Interaction of market and credit risk: an analysis of inter-risk correlation and risk aggregation

Hillebrand, Martin; Böcker, Klaus - 2008

In this paper we investigate the interaction between a credit portfolio and another risk type, which can be thought of as market risk. Combining Merton-like factor models for credit risk with linear factor models for market risk, we analytically calculate their interrisk correlation and show how...

Persistent link: https://www.econbiz.de/10010295948

Stress testing of real credit portfolios

Mager, Ferdinand; Schmieder, Christian - 2008

Stress testing has become a crucial point on the Basel II agenda, mainly as Pillar I estimates do not explicitly take portfolio concentration into account. We start from the credit portfolio of the German pension insurer being a cross-sectional representation of the German economy and...

Persistent link: https://www.econbiz.de/10010298762

Performance and regulatory effects of non-compliant loans in German synthetic mortgage-backed securities transactions

Trinkaus, Gaby - 2010

Over the term of a securitization transaction, the concept of non-compliance allows a securitizing bank to classify a securitized loan as materially non-compliant with certain transaction requirements. Such a loan becomes unqualified for loss allocation. Therefore, non-compliant loans can...

Persistent link: https://www.econbiz.de/10010301353

CDOs and systematic risk: Why bond ratings are inadequate

Krahnen, Jan Pieter; Wilde, Christian - 2009

This paper analyzes the risk properties of typical asset-backed securities (ABS), like CDOs or MBS, relying on a model with both macroeconomic and idiosyncratic components. The examined properties include expected loss, loss given default, and macro factor dependencies. Using a two-dimensional...

Persistent link: https://www.econbiz.de/10010303672

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