We develop a measure of systemic importance that accounts for the extent to which a bank propagates shocks across the banking system and is vulnerable to propagated shocks. Based on Shapley values, this measure gauges the contribution of interconnected banks to systemic risk, in contrast to...

Confronted with a speculative attack on its currency peg, an authority weighs the short-term benefit of giving in and fine tuning the economy against the long-term benefit of credibility-enhancing resistance. In turn, speculators with heterogeneous beliefs face strategic uncertainty that peaks...

This paper develops an empirical procedure for analyzing the impact of model misspecification and calibration errors on measures of portfolio credit risk. When applied to large simulated portfolios with realistic characteristics, this procedure reveals that violations of key assumptions of the...

Do public policy signals improve the alignment of market outcomes with economic fundamentals? Existing work contends that, when individual players have an incentive to coordinate their actions, public policy signals could steer these actions away from the fundamentals. We argue that such a...