The aim of this paper is to show that measures on tail dependence can be estimated in a convenient way by regression analysis. This yields the same estimates as the non-parametric method within the multivariate Extreme Value Theory framework. The advantage of the regression approach is contained...

This paper studies why the micro-prudential regulations fails to maintain a stable financial system by investigating the impact of micro-prudential regulation on the systemic risk in a cross-sectional dimension. We construct a static model for risk-taking behavior of financial institutions and...

We investigate the effects of the announcement and the disclosure of the clarification, methodology, and outcomes of the US banking stress tests on banks' equity prices, credit risk, systematic risk, and systemic risk during the 2009-13 period. We find only weak evidence that stress tests after...

This paper investigates contagion of major financial institutions by focusing on extreme stock return co-movements. Our measure of contagion within banking and insurance sectors is the number of coincidences of daily extreme returns that cannot be explained by a linear propagation model of...

We model systemic risk in an interbank market. Banks face liquidity needs as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks while reducing the cost of maintaining reserves. However, the interbank market exposes the...

This paper investigates systemic risk in the Dutch financial sector by focusing on extreme returns of the major financial institutions. Our measure of systemic risk is the number of coincidences of extreme returns that cannot be explained by a linear model of constant correlation. By using a...

Diversification by banks affects the systemic risk of the sector. Importantly, Wagner (2010) shows that linear diversification increases systemic risk. We consider the case of securitization, whereby loan portfolios are sliced into tranches with different seniority levels. We show that tranching...

The paper studies risk mitigation associated with capital regulation, in a context where banks may choose tail risk assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited liability. Moreover, higher capital may have an...

We conduct a laboratory experiment to examine under which circumstances a depositor-run at one bank may lead to a depositor-run at another bank. We implement two-person coordination games which capture the essence of the Diamond-Dybvig (1983) bank-run model. Subjects in the roles of followers...