We use outages as natural experiments to study sovereign bond market functioning. When the euro area futures market goes down, trading activity on the cash market declines, liquidity evaporates, and transaction prices deviate from fundamental values. Tracing back this macro-level market...

We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size...

Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR)...

Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR)...

We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size...

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax)on the aggregation of private information in financial markets. We analyze a financial market à la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a market...

This paper examines the use of ETFs by open-ended investment funds in the euro area to manage liquidity. We find that during the COVID-19 market turmoil, investment funds were the most run-prone investor type in the market for ETFs. We also show that open-ended funds that faced larger outflows...

This paper documents the extension of the system-wide stress testing framework of the ECB with the insurance sector for a more thorough assessment of risks to financial stability. The special nature of insurers is captured by the modelling of the liability side and its loss absorbing capacity of...

We build a model to simulate how the euro area market-based financial system may function under stress. The core of the model is a set of representative agents re ecting key economic sectors, which interact in asset, funding, and derivatives markets and face solvency and liquidity constraints on...

Overlapping portfolios constitute a well-recognised source of risk, providing a channel for financial contagion induced by the market price impact of asset deleveraging. We introduce a novel method to assess the market price impact on a security-by-security basis from historical daily traded...