We describe a general equilibrium model with a banking system in which the deposit bank collects deposits from households and the merchant bank provides funds to firms. The merchant bank borrows collateralized short-term funds from the deposit bank. In an economic downturn, as the value of...

The asymmetry in the tail dependence between U.S. equity portfolios and the aggregate U.S. market is a well-established property. Given the limited number of observations in the tails of a joint distribution, standard non-parametric measures of tail dependence have poor finite-sample properties...

This paper evaluates the impact of a screening process based on Environment, Social, and Governance (ESG) scores for an otherwise passive portfolio of investment-grade corporate bonds. The main result is that this filtering leads to a substantial improvement of the targeted ESG score without...

In this paper, we build portfolios with decreasing carbon footprint, which passive investors can use as new Paris-consistent (PC) benchmarks and have the same risk- adjusted returns as business as usual (BAU) benchmarks. As the distribution of firms' carbon intensity is very skewed, excluding a...

We quantify the capital shortfall that results from a global financial crisis by using a macrofinance dynamic stochastic general equilibrium model that captures the interactions between the financial and real sectors of the economy. We show that a crisis similar to that observed in 2008...

It is well known that the class of strong (Generalized) AutoRegressive Conditional Heteroskedasticity (or GARCH) processes is not closed under contemporaneous aggregation. This paper provides the dynamics followed by the aggregate process when the individual persistence parameters are drawn from...

We analyze the carbon footprint and emissions of the Swiss National Bank's (SNB) U.S. equity portfolio and compare its carbon performance to those of the world's largest asset manager, BlackRock, and to the Norwegian Government Pension Fund Global (GPFG). The SNB portfolio does as well as...