Owing to the disruptive events in the shadow banking system during the global financial crisis, policymakers and regulators have sought to strengthen the monitoring framework and to identify any remaining regulatory gaps. In accordance with its mandate, the European Systemic Risk Board (ESRB)...

In this paper we present a new approach to analyse the interconnectedness between a macro-level network and a local-level network. Our methodology is developed on the Diebold and Yilmaz connectedness measure and it considers the presence of entities within a global network which can influence...

Procyclicality of collateral haircuts and margins has become a widely proclaimed behavior and is currently discussed not only by academic literature but also by regulatory authorities in Europe. Procyclicality of haircuts is assumed to be a trigger of liquidity spirals due to its tightening...

This paper analyses whether the post-crisis regulatory reforms developed by globalstandard-setting bodies have created appropriate incentives for different types of market participants to centrally clear Over-The-Counter (OTC) derivative contracts. Beyond documenting the observed facts, we...

In both the subprime crisis and the euro-area crisis, regulators imposed bans on short sales, aimed mainly at preventing stock price turbulence from destabilizing financial institutions. Contrary to the regulators' intentions, financial institutions whose stocks were banned experienced greater...

Financial intermediaries often provide guarantees that resemble out-of-the-money put options, exposing them to tail risk. Using the U.S. life insurance industry as a laboratory, we present a model in which variable annuity (VA) guarantees and associated hedging operate within the regulatory...

Over the past few years the CDS market's role has evolved from mostly providing default protection towards credit risk trading. The first-ever credit event in a developed country's sovereign CDS has further highlighted the importance of the CDS market from a macro-prudential perspective....

Securities financing transaction (SFT) markets and the management and usage of collateral are elements of the financial system which are of systemic relevance. As such, there is a clear need for enhanced transparency and regulatory oversight. The European Systemic Risk board (ESRB) mandated a...

This paper contains an analysis of the network of the 29 largest European insurance groups and their financial counterparties. Insurance companies have direct exposures to other insurers, banks and other financial institutions through the holdings of debt, equity and other financial instruments....

An epidemiologist calculating the risk of a localised epidemic becoming a global pandemic would investigate every possible channel of contagion from the infected region to the rest of the world. Focusing on, say, the incidence of close human contact would underestimate the pandemic risk if the...