Regulators aiming to ward off the next financial market failure need to implement rules to smooth the boom-bust cycle in margin requirements and haircuts used in securities financing and derivative transactions, which seriously exacerbated the last financial crisis. In this study, the author...

We compare and contrast two prominent notions of financial cycles: a domestic variant, which focuses on how financial conditions within individual economies lead to boom-bust cycles there; and a global variant, which highlights how global financial conditions affect individual economies. The two...

This Article demonstrates that regulatory collisions are an unintended consequence of well-meaning, post-financial crisis reforms by both public and private market regulators in the over-the-counter derivatives market. Many of these reforms are designed to regulate systemic risk. As this Article...

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

Price bubbles in multiple assets are sometimes nearly coincident in occurrence. Such near-coincidence is strongly suggestive of co-movement in the associated asset prices and likely driven by certain factors that are latent in the financial or economic system with common effects across several...

Do rating agencies increase or decrease financial market stability? This paper analyzes whether credit rating agencies may help to avoid inefficient self-fulfilling credit defaults. If investors follow risk-dominant strategies, we show that rating announcements and investors' private information...

It has been argued in the literature that emergency liquidity injections should be conducted preferably in the form of open market operations. As we show in the present paper, this is not necessarily the case when liquidity may be alternatively used for speculative purposes during the crisis. In...

This paper proposes a new double-question survey method that elicits information about how individuals subjective belief valuations are compared and related to their price expectations. An individual respondent is presented with two sets of questions, one that asks about his/her belief regarding...

We examine the dynamics and the drivers of market liquidity during the financial crisis, using a unique volume-weighted spread measure. According to the literature we find that market liquidity is impaired when stock markets decline, implying a positive relation between market and liquidity...