We present an economic model of systemic risk in which undercapitalization of the financial
sector as a whole is assumed to harm the real economy, leading to a systemic risk externality…

Why did the popping of the housing bubble bring the financial system—rather than just the
housing sector of the economy—to its knees? The answer lies in two methods by which banks …

We show that eurozone bank risks during 2007–2013 can be understood as carry trade
behavior. Bank equity returns load positively on peripheral (Greece, Italy, Ireland, Portugal, Spain…

We study the effect of loan portfolio focus versus diversification on the return and the risk of
105 Italian banks over the period 1993–99 using data on bank‐by‐bank exposures to …

Systemic risk is modeled as the endogenously chosen correlation of returns on assets held
by banks. The limited liability of banks and the presence of a negative externality of one bank’…

This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidity-adjusted
capital asset pricing model, a security's required return depends on its expected …

Insider trading in the credit derivatives market has become a significant concern for regulators
and participants. This paper attempts to quantify the problem. Using news reflected in the …

An insightful look at how to reform our broken financial system The financial crisis that unfolded
in September 2008 transformed the United States and world economies. As each day's …

Can banks maintain their advantage as liquidity providers when exposed to a financial crisis?
While banks honored credit lines drawn by firms during the 2007 to 2009 crisis, this …

We explore the design of climate stress tests to assess and manage macroprudential risks
from climate change in the financial sector. We review the climate stress scenarios currently …