This paper presents a possible solution to financial crises by addressing the core of the problem of systemic risk. To get there, it first illustrates a number of crises related situations before the definition of systemic risk is detailed. It then explains challenges of systemic risk and...

We examine the impact of economic policy uncertainty (EPU) on systemic risk. Based on a large sample of 889 listed banks from 20 countries, we provide empirical evidence that banks are more likely to contribute more to systemic risk when EPU increases. The effect operates through the bank...

We introduce endogenous fire sales into a simple network model. For any given initial distribution of shocks across the network, we develop a clearing algorithm to solve for the financial equilibrium. We then utilise the results to perform ex ante risk assessment and derive risk premia for every...

Sovereign risk is defined as a country?s ability-to-pay and willingness-to-pay its debt. This paper examines how cabinet reshuffles affecting the ministry of finance or economics are perceived by sovereign bond holders in twelve Latin American countries from 1992 to 2005. We find that such...

We show that international consumption risk sharing is significantly improved by capital flows, especially portfolio investment. Concomitantly, we show that poor institutions hamper risk sharing, but to an extent that decreases with openness. In particular, risk sharing is prevalent even among...

The financial crisis of 2007-2008 had major implications for the foreign exchange market. We review events and implications for exchange rates, volatility, returns to currency investing, and transaction costs. This blow-by-blow" narrative is intended to be a resource for researchers seeking a...