The value of assets in the digital ecosystem has grown rapidly amid periods of high volatility. Does the digital financial system create new potential challenges to financial stability? This paper explores this question using the Federal Reserve's framework for analyzing vulnerabilities in the...

The events from the 2007-2009 financial crisis have raised concerns that the failure of large financial institutions can lead to destabilizing fire sales of assets. The risk of fire sales is related to exemptions from bankruptcy's automatic stay provision enjoyed by a number of financial...

We develop a parsimonious model to study the equilibrium structure of over-the-counter securities markets. We show that regulations aimed at reducing counterparty risk and improving liquidity can be ineffcient. Such regulations have a direct positive effect on entry in those markets, thus...

This paper studies the optimal clearing arrangement for bilateral financial contracts in which an assessment of counterparty credit risk is crucial for efficiency. The economy is populated by borrowers and lenders. Borrowers are subject to limited commitment and hold private information about...