We empirically examine how systemic risk in the banking sector leads to correlatedrisk in office markets of global financial centers. In so doing, we compute an aggregatedmeasure of systemic risk in financial centers as the cumulated expectedcapital shortfall of local financial institutions. Our...

Systemic risk must include the housing market, though economists have not generally focused on it. We begin construction of an agent-based model of the housing market with individual data from Washington, DC. Twenty years of success with agent-based models of mortgage prepayments give us hope...

The misevaluation of risk in securitized financial products is central to understanding the financial crisis of 2007 - 8. This paper characterizes the evolution of factors affecting collateralized debt obligations based on subprime mortgages. A key feature of subprime-mortgage backed indices is...

We propose a simple network–based methodology for ranking systemically important financial institutions. We view the risks of firms –including both the financial sector and the real economy– as a network with nodes representing the volatility shocks. The metric for the connections of the...

In the wake of the financial crisis it has become clear that there is a need for macroprudential oversight in addition to the existing microprudential banking supervision. One of the lessons from the crisis is that the network structure of the banking system has to be taken into account to...

One of the most pressing questions in the aftermath of the financial crisis is how to deal with systemically important financial institutions (SIFIs). The purpose of this paper is to review the recent literature on systemic risk and evaluate the regulation proposals in the Basel III framework...

The financial crisis has highlighted the need for models that can identify counterparty risk exposures and shock transmission processes at the systemic level. We use the euro area financial accounts (flow of funds) data to construct a sector-level network of bilateral balance sheet exposures and...

The paper analyses the causes of the current crisis of the global financial system, with particular emphasis on the systemic elements that turned the crisis of subprime mortgage-backed securities in the United States, a small part of the overall system, into a worldwide crisis. The first half of...

This paper focuses on the need for a lex specialis for resolution of insolvent banks and other financial institutions serving similar functions, and on requirements for making resolution procedures effective. After a review of the objectives of general insolvency law and the special...

According to theory, market concentration affects the likelihood of a financial crisis in different ways. The “concentration-stability” and the “concentrationfragility” hypotheses suggest opposing effects operating through specific channels. Using data of 160 countries for the period...