We model bank management actions in severe stress test conditions using a game-theoretical framework. Banks update their balance sheets to strategically maximize risk-adjusted returns to shareholders given three regulatory constraints and feedback effects related to fire sales, interactions of...

We examine the system-wide effects of liquidity regulation on banks’ balance sheets. In the general equilibrium model, banks have to hold liquid assets, and choose among illiquid assets varying in the extent to which they are difficult to value before maturity, e.g., structured securities. By...

Computational methods both open the frontiers of economic analysis and serve as a bottleneck in what can be achieved. Using the quantum Monte Carlo (QMC) algorithm, we are the first to study whether quantum computing can improve the run time of economic applications and challenges in doing so....

The United States financial system can be restructured by giving universal direct access to credit risk-free central bank money. In the 10 years since the financial crisis, technological advancements and regulatory tools have laid the foundation for Central Bank Digital Currencies to emerge as...

The coronavirus outbreak raises the question of how central bank liquidity support affects financial stability and promotes economic recovery. Using newly assembled data on cross-county flu mortality rates and state-charter bank balance sheets in New York State, we investigate the effects of the...

I construct a new composite measure of systemic financial market stress for Canada. Compared with existing measures, it better captures the 1990 housing market correction and more accurately reflects the absence of diversification opportunities during systemic events. The index can be used for...