This paper develops a formula to numerically estimate the unsubsidized, fair-market value of the toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were on average 33.9 percent at origination. In contrast, by the 3rd quarter of the 2010, there was on...

We assess the impact of the corporate sector purchase programme (CSPP), the corporate arm of the ECB's quantitative easing, over its first year of activity (June 2016 - June 2017). Focusing on the primary bond market, we find evidence of a significant impact of the CSPP on yield spreads, both...

Anecdotal evidence suggests that investor protection affects the demand for equity, but existing theories emphasize only the effect of investor protection on the supply of equity. We build a model showing that the demand for equity is important in explaining financial development. If the level...

We show that seasoned equity offerings (SEOs), in which secondary share-offering size greatly exceeds market share turnover, provide a unique opportunity for stock price manipulation by speculators holding restricted shares. The proposed new theory is consistent with several puzzling empirical...

In this chapter we describe stress testing at banks covering the major products and businesses in which banks engage. This includes commercial and retail lending, capital markets (investment banking, sales and trading), and trust and custody. We cover loss and net income modeling and thus...

A systemic risk measure is proposed accounting for links and mutual dependencies between financial institutions utilising tail event information. FRM (Financial Risk Meter) is based on Lasso quantile regression designed to capture tail event co-movements. The FRM focus lies on understanding...

Managers tend to issue equity when a firm is overvalued. Short selling is generally frequent among overvalued firms. By conditioning short selling on firm overvaluation, we show that short selling reduces managerial equity market timing and increases leverage. This moderating impact of short...

I study the history and performance of commercial real estate (CRE) in the pension fund portfolio, showing how many plan sponsors fundamentally changed their approach to CRE investment once underfunding gaps began to emerge in the early and middle 2000s. Several new empirical facts are...

Bilateral derivatives valuation is subject to counterparty credit risk (CCR) in that a counterparty could jump to default or its credit spread could vary over time. In the nomenclature of risk management, the former is called CCR exposure and the later leads to credit valuation adjustment (CVA)....