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Choosing a proper external risk measure is of great regulatory importance, as exemplified in the Basel II and Basel III Accord which use Value-at-Risk (VaR) with scenario analysis as the risk measures for setting capital requirements. We argue a good external risk measure should be robust with...
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This short note is to show that the strong non-superneutrality of monetary policy in Brunnermeier and Sannikov (2016) does not hold if taking into account the pecuniary externality of capital. Higher money growth rate leads to a higher level of capital but not higher growth rate of the economy...
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Elementary portfolio theory implies that environmentalists optimally hold more shares of polluting firms than non … reflect the demand to hedge against high pollution states. Pigouvian taxation can reverse the aggregate investment results … polluters, comparing the implications when environmentalists coordinate to internalize pollution, or have nonpecuniary …
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