In this paper we study systemic risk for the US and Europe. We show that banks' exposures to common risk factors are crucial for systemic risk. We come to this conclusion by first showing that relations between US and European banks are smaller than within each region. We then show that European...

In the last decades, international financial integration has markedly increased. This paper analyses the impact of these developments on banks' common exposure to shocks and on banking sector systemic risk. Theoretically, this impact is ambiguous. Empirically, we find that banks' common exposure...

We examine the pervasive view that "equity is expensive" which leads to claims that high capital requirements are costly for society and would affect credit markets adversely. We find that arguments made to support this view are fallacious, irrelevant to the policy debate by confusing private...

We use the results of the ECB's Comprehensive Assessment to evaluate the importance of bank business model on risk assessment and the persuasive effectiveness of different supervisory styles on banks' recapitalization. Our analysis reveals inconsistencies in the information content provided by...

We apply text analysis to Twitter messages in Spanish to build a sentiment- based risk index for the financial sector in Mexico. We classify a sample of tweets for the period 2006-2019 to identify messages in response to positive or negative shocks to the Mexican financial sector. We use a...

We apply sentiment analysis to Twitter messages in Spanish to build a sentiment risk index for the financial sector in Mexico. We classify a sample of tweets from 2006-2019 to identify messages in response to a positive or negative shock to the Mexican financial sector, relative to merely...

As a form of negative externality, a natural economic response to systemic risk is to look to taxation to correct it. However, we argue in this paper that the problem of systemic risk is not a standard externality problem. First, a 'polluter pays' approach is inapplicable because the polluter is...

We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks' marginal contributions to the systemic risk. The methodology is applied using publicly available data to the 19 bank holding companies covered by the U.S....

This paper extends the approach of measuring and stress-testing the systemic risk of a banking sector in Huang, Zhou, and Zhu (2009) to identifying various sources of financial instability and to allocating systemic risk to individual financial institutions. The systemic risk measure, defined as...