liquidity constraints arising from liquidity risk and systemic risk. We do so by characterising the impact of an exogenous … financial turmoil and credit rationing. Trade credit enhances the resilience of firms to liquidity shocks and creates systemic … risk. These features of trade credit are investigated with the aim of pinning down their effects on the financing of …

financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be … leverage to still mitigate an increase in systemic risk. In our model, this optimal diversification further depends on the … leverage does not result in an increase of systemic risk, and a risky regime, in which excessive leverage cannot be mitigated …

We model the systemic risk associated with the so-called balance-sheet amplification mechanism in a system of banks … that a strong compliance with capital requirements, usually alleged to be procyclical, does not increase systemic risk … requirements increases significantly systemic risk. Our findings have implications in terms of possible macro-prudential policies …

particular, the diversification of credit risk across many borrowers has ambiguous effects on systemic risk in the presence of …

models, the measurement and indicators of systemic risk, macroprudential tools and their effectiveness; and to identify …