We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default … swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a …

Banks are growing ever larger compared to their national economies. We show that increases in relative bank size … (measured as a bank's liabilities divided by national GDP) are linked to banks displaying higher tail risk. This effect is not … entirely due to risk channels that disproportionately expose relatively large banks to systematic tail risks, sovereign risks …

losses transmitted after banks default, but also for losses due to the fact that creditors revalue their exposures when … becoming negligible. By decomposing the change in losses into two main contributions — the increase in banks' capital and the … capital among banks is also important …