The purpose of our study is to provide an overview of the revisions made to the Basel III regulatory framework in the aftermath of the 2007 crisis, with regard to measuring the risk associated with positions included in the trading book. The calculation of the regulatory capital requirement...

Home appraisals are produced for millions of residential mortgage transactions each year, but appraised values are rarely below the purchase contract price: Some 30% of appraisals in our sample are exactly at the home price (with less than 10% of them below it). We lay out a basic theoretical...

Mankind's quest for markets that can meet the challenge of an unpredictable future with limited resources ended up in derivative markets, which provides all the stakeholders equal access to spread their risks thinly into the economy. Until the negative impact of the financial crisis on them was...

This paper explores the relationship between regulatory complexity and systemic risk. Building upon the distinction between measurable risk and uncertainty, it outlines the fundamentals of the main regulatory frameworks of the last two decades (with a focus on the Basel Accords). The resulting...

In MetLife, Inc. v. Financial Stability Oversight Council, Civil Action No. 15-0045 (RMC) (D.D.C. March 30, 2016), the U.S. District Court for the District of Columbia overturned the designation of MetLife, Inc., as a systemically important financial institution regulated by the Federal Reserve...

This response to the 2009 UK White Paper on ‘Reforming Financial Markets' argues for stronger democratic oversight of regulators and for regulatory diversity in order to reduce ‘market herding' and the consequent systemic risks. In the context of hitherto weak democratic accountability and...

With the New Basle Capital Accord banks’ capital requirements are determined with risk weights based on internaland external ratings and probabilities of default (PD’s). PD’s are mostly estimated from historical defaultrates. In recent working papers the Basle Committee on Banking...

The persistence of financial instability calls into question the adequacy of the current regulatory regime. Acritical review of the three pillars at the core of current financial regulation exposes some structural flaws.[...]

Although the world of banking and finance is becoming more integrated every day, in most aspects the world of financial regulation continues to be narrowly defined by national boundaries. The main players here are still national governments and governmental agencies. And until recently, they...

The roles of Fannie Mae and Freddie Mac have become increasingly controversial in the modern world of residential mortgage finance. We describe the special features of these two companies and their roles in the mortgage markets. We then discuss the controversies that surround them and offer...