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From banks' strategies to financial (in)stability

Berardi, Simone; Tedeschi, Gabriele - 2015

This paper aims to shed light on the emergence of systemic risk in credit systems. By developing an interbank market with heterogeneous financial institutions granting loans on different network structures, we investigate what market architecture is more resilient to liquidity shocks and how the...

Persistent link: https://www.econbiz.de/10011306996

Why did so many people make so many ex post bad decisions? The causes of the foreclosure crisis

Foote, Christopher L.; Gerardi, Kristopher S.; Willen, … - 2012

We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and...

Persistent link: https://www.econbiz.de/10010292274

That's how we roll: An experiment on rollover risk

Bosch-Rosa, Ciril - 2014

There is consensus that the recent financial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the effects that contract length (i.e. maturity mismatch) has on the...

Persistent link: https://www.econbiz.de/10010427066

Better The Devil You Know Than The Devil You Don't − Financial Crises Between Ambiguity Aversion And Selective Perception

Scholz, Peter; Grossmann, David; Krueckeberg, Sinan - In: The Central European Review of Economics and Management … 2 (2018) 1, pp. 155-174

Aim: Financial crises are dangerous and frightening events with potentially severe consequences for investors, financial systems and even whole economies. Hence, we suppose that market participants show increased proneness to emotionally biased decisions during times of market distress. We test...

Persistent link: https://www.econbiz.de/10012427232

Non-performing loans, systemic risk and resilience in financial networks

Bottazzi, Giulio; de Sanctis, Alessandro; Vanni, Fabio - 2016

After the outbreak of the financial crisis in 2007-2008 the level of non-performing loans (NPLs) in the economy has generally increased. However, while in some countries this has been a transitory phenomenon, in others it still represents a major threat for economic recovery and financial...

Persistent link: https://www.econbiz.de/10011789711

What determines euro area bank CDS spreads?

Annaert, Jan; De Ceuster, Marc; Van Roy, Patrick; … - 2010

This paper decomposes the explained part of the CDS spread changes of 31 listed euro area banks according to various risk drivers. The choice of the credit risk drivers is inspired by the Merton (1974) model. Individual CDS liquidity and other market and business variables are identified to...

Persistent link: https://www.econbiz.de/10011506710

Bank funding risk, reference rates, and credit supply

Cooperman, Harry; Duffie, Darrell; Luck, Stephan; Wang, … - 2023

bank funding costs. We show that credit supply is dampened by the associated debtoverhang cost to bank shareholders. Until … offset if drawdowns are expected to be left on deposit at the same bank, which happened at some of the largest banks during …

Persistent link: https://www.econbiz.de/10014302764

A bibliometric analysis of machine learning econometrics in asset pricing

Zapata, Hector O.; Mukhopadhyay, Supratik - In: Journal of Risk and Financial Management 15 (2022) 11, pp. 1-17

Machine learning (ML) is a novel method that has applications in asset pricing and that fits well within the problem of measurement in economics. Unlike econometrics, ML models are not designed for parameter estimation and inference, but similar to econometrics, they address, and may be better...

Persistent link: https://www.econbiz.de/10014332691

Horváth, Gergely; Kiss, Hubert János - 2014

believe that a bank run is underway if the number of observed withdrawals in their sample is high. Theoretically, with highly … many parameter settings the likelihood of bank runs is less than one. To investigate the intermediate cases, we use … simulations and find that decreasing the correlation reduces the likelihood of bank runs, often in a non-linear way. We also study …

Persistent link: https://www.econbiz.de/10010494603

Leverage and beliefs: Personal experience and risk taking in margin lending

Koudijs, Peter; Voth, Hans-Joachim - 2014

What determines risk-bearing capacity and the amount of leverage in financial markets? Using unique archival data on collateralized lending, we show that personal experience can affect individual risk-taking and aggregate leverage. When an investor syndicate speculating in Amsterdam in 1772 went...

Persistent link: https://www.econbiz.de/10011282480