This paper examines relationships between size and risk in financial markets. Based on the work of Makridakis / Taleb [2009] and Taleb / Tapiero [2009], presents the problems of excessive risk and imbalances caused by the size of firms. Markets mixed on firm growth traps externalities can...

According to current regulation, European banks can apply zero risk weights to sovereign exposures in their balance sheet, irrespective of the assigned rating. We show that a zero risk weighting of sovereign bonds has implications by distorting banks' asset allocation decisions. Due to the lower...

We develop an asset-pricing model with endogenous corporate policies that explains how inflation jointly impacts real asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal coupons and sticky profitability. Taken together, these two...

We show how real and financial frictions amplify, prolong and propagate the impact of uncertainty shocks. We first use a novel instrumentation strategy to address endogeneity in estimating the impact of uncertainty, by exploiting differential firm exposure to exchange rate, policy, treasury, and...

This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

We study the effect of the business cycle on optimal capital structure choice and the benefit to leverage. We propose a regime switching model with a state-dependent cash flow process to capture macroeconomic risk in a firm's cash flow. Our model is parsimonious but still realistic and allows...

Fears mount on the global market regarding a “bubble” on the stock market transition of major institutional investors to riskier assets, growth in issuers credit risks. The domestic market demonstrates stock market stagnation against the backgroundof ruble’s depreciation

We assess the impact of geopolitical risk and world uncertainty on the sovereign debt risk of 26 European Economies during the period 1984-2022, through the implementation of OLS-Fixed Effects regressions and the Generalized Method of Moments (GMM). We find that geopolitical tensions and global...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...

Under conditions of radical uncertainty, risk sharing renders financial systems anti-fragile. Our goal in this paper is to show that risk-sharing Islamic finance (RSIF) shares the characteristics defined by Taleb for an anti-fragile system, by mapping some characteristics of anti-fragility onto...