The latest financial crisis has exposed substantial weaknesses in the bank risk models used by national regulators as well as the Basel Accords. The study is aimed at presenting the evolution and critique of risk measures and risk models in banking, with a special focus on the dynamically...

This paper documents the existence of primary dealers’ losses in Treasury bond markets and investigates how these losses a¤ect dealers’ market value. Using a novel data set that tracks more than 2,350 primary-to-secondary transactions, we find that bond losses for primary dealers are...

This article responds to calls in the literature for a major shift in approaches to explaining systemic risk. It applies insights from multiple disciplines, but departs from the monistic positivist research orientations of many previous contributions by taking a carefully argued pragmatic...

The central problem for financial regulation is reducing systemic risk. Systemic risk is the risk that the failure of one significant institution can cause or significantly contribute to the failure of other significant institutions. This paper addresses the five most important policies for...

The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited liability. When capital raising is costly, poorly...