Banking across borders has risen substantially over the past two decades. Yet there is significant heterogeneity in the international and global activities of banks across countries. This paper develops and tests a theoretical model that explains this variation from an international trade theory...

We investigate financial intermediaries' interest rate risk management as the simultaneous decision of on-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher likelihood of bank distress makes banks reduce...

We investigate financial intermediaries' interest rate risk management as the simultaneous decision of on-balance-sheet exposure and interest rate swap use. Our findings show that both decisions are substitute risk management strategies. A higher likelihood of bank distress makes banks reduce...

We introduce an innovative theoretical framework for the valuation and replication of derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on credit and debit valuation adjustments (CVA and...

We introduce an innovative theoretical framework for the valuation and replication of derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on credit and debit valuation adjustments (CVA and...

In this paper, we focus on the interconnectedness of banks and the price they pay for liquidity. We assess how the concentration of credit relationships and the position of a bank in the network topology of the system influence the bank's ability to meet its liquidity demand. We use quarterly...

The pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unknown, and maximum entropy serves as the leading method for estimating unobserved counterparty exposures. This paper proposes an efficient alternative that combines...

The pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unknown, and maximum entropy serves as the leading method for estimating unobserved counterparty exposures. This paper proposes an efficient alternative that combines...

In this paper, we focus on the interconnectedness of banks and the price they pay for liquidity. We assess how the concentration of credit relationships and the position of a bank in the network topology of the system influence the bank's ability to meet its liquidity demand. We use quarterly...

This paper introduces a stress test of the corporate credit portfolios of 24 large German banks by a two-stage approach: First, a macro-econometric model is used to forecast the impact of a substantial increase of the user cost of business capital for firms worldwide on three particularly...