The main goal of this paper is to introduce a new financial stress indicator, signaling regime transitions from stability to turbulence. This indicator is based on the combination of a wide range of market prices of risk, properly normalized to make them comparable across markets and time...

With the introduction of the Capital Requirements Regulation (CRR) in the European Union, the qualitative requirements for bank regulatory capital have changed. These changes aim at implementing in Europe the Basel III principles for better bank capital that is able to absorb losses of banks,...

We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the...

This theoretical paper explores the effects of costly and non-costly collateral on moral hazard, when collateral value may fluctuate. Given that all collateral is costly, stochastic collateral will entail the same positive incentive effects as nonstochastic collateral, provided the variation in...

The failure of financial institutions is often depicted as an externally-driven event in which certain triggers almost inevitably lead to the collapse of the firm. In contrast, this paper views institutional failure as a multistage process in which precautionary measures taken by the firm can...

VaR_Delta-Normal fails in two counts: subadditivity and potentially producing losses larger than its portfolio value. This paper solves the second inconsistency developing formulas derived from a put option, named PVaR_Delta-Normal and Put_Expected_Shortfall, PSF_Delta-Normal; the latter also...

This paper examines blanket guarantee and restructuring decisions in respect of a multinational bank (MNB) using Nash bargaining, when the threat of a panic motivates countries to take decisions quickly. The failure of the bank would cause unevenly distributed externalities between the countries...

This research focuses on the advancement of the Compliance function within banks, investment and insurance companies and on the effect of applying Community regulations as called for by the MiFID Directive. Eighty four financial intermediaries: banks, investment companies and insurance companies...

This study investigates whether banks and insurance corporations perform regulatory arbitrage by buying bonds with inflated credit ratings. We argue that credit rating based capital requirements incentivize banks and insurance corporations to hold more bonds with inflated credit ratings. We...

Banks and other financial institutions which were too-big-to-fail (TBTF) played a central role during the Global Financial Crisis of 2007-2009. The present article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status,...