Credit institutions are to an increasing extent using Contingent Convertible Bonds (CoCos) to meet part of their capital requirements, which could suggest that the market for CoCos contains useful information on the robustness of the issuer. This paper gives a thorough introduction to CoCos -...

This paper presents a comprehensive model of financial contagion encompassing both direct and indirect transmission channels. We introduce direct contagion through a 2-layered multiplex network to account for the distinct dynamics resulting from collateralized and uncollateralized transactions....

Financial losses can have persistent effects on the financial sy stem. This paper proposes an empirical measure for the duration of these effects, S pillover P ersistence. I d ocument that Spillover Persistence is strongly correlated with financial c onditions; d uring b anking crises, Spillover...

This paper proposes Spillover Persistence as a measure for financial fragility. The volatility paradox predicts that fragility builds up when volatility is low, which challenges existing measures. Spillover Persistence tackles this challenge by exploring a novel dimension of systemic risk: loss...

The avenue to find a balanced assessment of systemic financial institutions needs the integration of macro and micro granular datasets. This paper investigates how macroeconomic shocks affect systemic risk through several transmission channels. Employing Indonesia datasets over 2008–2019, we...

Interbank claims are a concern to regulators as they might facilitate the dissemination of defaults and generate spill-over effects. Building on a simple model, this paper introduces a measure of the spill-over effects that a bank generates when it defaults. The measure is based on an explicit...

We highlight the ex ante risk-shifting incentives faced by a bank's shareholders/managers when CoCos (contingent convertible capital) are part of the capital structure. The risk shifting incentive arises from the wealth transfers that the shareholders will receive upon the CoCo's conversion...

In this paper we develop a model of shock propagation in the banking system with feedback channels towards the real economy. Our framework incorporates the interactions between the network of banks (exhibiting contagion mechanisms among them) and the network of firms (transmitting shocks to each...

I study economies where banks do not fully internalize the social costs of default, which distorts their lending decisions. In all these economies, a common general equilibrium effect leads to aggregate over-investment. As a result, under laissez-faire, crises are too frequent and too costly...

Over the past decades, the framework for financing has experienced a fundamental shift from traditional bank lending towards a broader market-based financing of financial assets. As a consequence, regulated banks increasingly focus on coping with regulatory requirements meaning that the...