Model risk and the implications for risk management, macroprudential policy, and financial regulations
Risk forecasting is central to financial regulations, risk management, and macroprudential policy. This column raises concerns about the reliance on...
Model Risk of Risk Models
This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models...
Risk Models-at-Risk
The experience from the global financial crisis has raised serious concerns about the accuracy of standard risk measures as tools for the...
The new market-risk regulations
Basel III is coming into focus. The fundamental logic of the regulatory changes seems sensible, but the devil is in the detail – empirical...
Solvency II: Three principles to respect
The European legislation on prudential rules for insurance companies (Solvency II) is set for a final decision. It will be of fundamental importance...
Political challenges of the macroprudential agenda
Central banks frequently lead the macroprudential policy implementation. The hope is that their credibility in conquering inflation might rub off on...
Global Financial Systems: Stability and Risk
The book uses economic theory, finance, mathematical modelling, risk theory, and policy to posit a comprehensive, coherent and current economic...
Iceland’s post-Crisis economy: A myth or a miracle?
Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked...
Capital controls are still ruining Iceland after half a decade
One aspect of the Cypriot crisis resolution is of particular concern. As authorities fear that anyone with money in Cyprus will want to take it out as...
The capital controls in Cyprus and the Icelandic experience
Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s...
Towards a more procyclical financial system
Is the fact that different banks have different risk models problematic? Contrary to the Basel Committee and the European Banking Authority, this...
Balance Sheet Capacity and Endogenous Risk
Banks operating under Value-at-Risk constraints give rise to a well-defined aggregate balance sheet capacity for the banking sector as a whole that...
Risk Appetite and Endogenous Risk
Risk is endogenous. Equilibrium risk is the fixed point of the mapping that takes perceived risk to actual risk. When risk-neutral traders operate...
On the impact of fundamentals, liquidity and coordination on market stability
Complex interactions between fundamentals and liquidity during unstable periods in financial markets are succinctly modeled with co-ordination games...
Consistent measures of risk
In this paper we compare overall as well as downside risk mea- sures with respect to the criteria of first and second order stochastic dominance...
Equilibrium asset pricing with systemic risk
We provide an equilibrium multi-asset pricing model with micro-founded systemic risk and heterogeneous investors. Systemic risk arises due to...
