Consistent with theoretical predictions, we show that investors incorporate expected joint liquidation costs in their portfolio decisions. Using detailed security-level holdings of U.S. Money Market Mutual Funds (MMFs), we construct a new measure of portfolio similarity among investors and show...

We document that public interventions in the corporate sector during the COVID-19 pandemic help firms access bank loans, cushion liquidity shortfalls, and boost their market valuations. We use firm-level data on COVID-19-related news to trace firms’ liquidity shocks in several European...

Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. Financial institutions are required to maintain a capital cushion against such events and stress tests...

We investigate the risk taking incentives of "stressed banks" - the banks that are subject to annual regulatory stress tests in the U.S. since 2011. We document that stress tests effectively encourage prudent investment from stressed banks through regulatory monitoring, but also provide them...

We document the mechanism through which the risk of fire sales in the sovereign bond market contributed to the effectiveness of two major central bank interventions designed to restore financial stability during the European sovereign debt crisis. As a lender of last resort via the long-term...

Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. We provide a test of these stress tests by comparing their risk assessments and outcomes to those from...

This paper investigates the meaning of systemic risk in energy markets and proposes a methodology to measure it. Energy Systemic Risk is defined by the risk of an energy crisis raising the prices of all energy commodities with negative consequences for the real economy. Measures of the total...

This paper highlights the empirical interaction between solvency and liquidity risks of banks that make them particularly vulnerable to an aggregate crisis. I find that banks lose their access to short-term funding when markets expect they will be insolvent in a crisis. Conversely, the expected...

This paper investigates the meaning of systemic risk in energy markets and proposes a methodology to measure it. Energy Systemic Risk is defined by the risk of an energy crisis raising the prices of all energy commodities with negative consequences for the real economy. Measures of the total...