This paper studies a household's optimal demand for a reverse mortgage. These contracts allow homeowners to tap their home equity to finance consumption needs. In stylized frameworks, we show that the decision to enter a reverse mortgage is mainly driven by the dierential between the aggregate...

This paper examines the validity of the risk-return trade-off for a sample of Czech banks over the period 2002-2022 by analysing the relationship between the bank risk and risk-adjusted returns. I find evidence of a significant negative association between the regulatory risk measure and...

We build a balance sheet-based model to capture run risk, i.e., a reduced potential to raise capital from liquidity buffers under stress, driven by depositor scrutiny and further fuelled by fire sales in response to withdrawals. The setup is inspired by the Silicon Valley Bank (SVB) meltdown in...

We analyze spectral risk measures with respect to comparative risk aversion following Arrow (1965) and Pratt (1964) on the one hand, and Ross (1981) on the other hand. The implications for two standard financial decision problems, namely the willingness to pay for insurance and portfolio...

Liquidity has its systemic aspect that is frequently neglected in research and risk management applications. We build a model that focuses on systemic aspects of liquidity and its links with solvency conditions accounting for pertinent interactions between market participants in an agent-based...

This paper uses granular bond portfolio data to study how banking systems across the European Union (EU) adjust their asset holdings in response to regulatory solvency shocks. We also study the impact of these shocks at financial intermediaries on the prices of bonds in their portfolio. Despite...

We study three fundamental components of financial agency settings: Perception and communication of investment profiles, the interaction of agents’ and clients’ preferences, and the role of (non-)monetary incentives. The perception of investment profile terminology is very heterogeneous,...

This paper provides initial evidence on counterparty risk-mitigation activities of financial institutions on the basis of Depository Trust and Clearing Corporation's (DTCC) proprietary bilateral credit default swap transactions and positions. We show that financial institutions that are active...

We study portfolio selection using Conditional Value-at-Risk and, as its natural extension, spectral risk measures instead of the variance. We do not focus only on the derivation of the efficient frontiers, but also consider the choice of optimal portfolios within an integrated framework. We...

The hedge funds industry has evolved tremendously in recent years. According to the CASAM CISDM Industry Report, assets under management in hedge funds had grown from less than USD 50 billion at the end of 1990 to over USD 2.1 trillion at the end of 2007. However, assets managed by hedge funds...