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...
Comparing downside risk measures for heavy tailed distribution
Using regular variation to define heavy tailed distributions, we show that prominent downside risk measures produce similar and con- sistent ranking...
Subadditivity re–examined: the case for value-at-risk
This paper explores the potential for violations of VaR subadditivity both theoretically and by simulations, and finds that for most practical...
Highwaymen or heroes: should hedge funds be regulated?
Our objective was to study the need for regulating hedge funds, using existing regulatory approaches and our own models as a frame of reference. Our...
Feedback trading
Order flow has been found to carry information to the market. When assessing how informative order flow is, the VAR methodology is typically employed...
What happens when you regulate risk?: evidence from a simple equilibrium model
The implications of Value-at-Risk regulations are analyzed in a CARA-normal general equilibrium model. Financial institutions are heterogeneous in...
Anatomy of a Market Crash: A Market Microstructure Analysis of the Turkish Overnight Liquidity Crisis
An order flow model, where the coded identity of the counterparties of every trade is known, hence providing institution level order flow, is applied...
On Time-scaling of Risk and the Square–root–of–time Rule
Many financial applications, such as risk analysis and derivatives pricing, depend on time scaling of risk. A common method for this purpose, though...
Asset Price Dynamics with Value-at-Risk Constrained Traders
Risk management systems in current use treat the statistical relations governing asset returns as being exogenous, and attempt to estimate risk only...
An Academic Response to Basel II
It is our view that the Basel Committee for Banking Supervision, in its Basel II proposals, has failed to address many of the key deficiencies of the...
The Emperor has no Clothes: Limits to Risk Modelling
This paper considers the properties of risk measures, primarily Value–at–Risk (VaR), from both internal and external (regulatory) points of view. It...
Real Trading Patterns and Prices in Spot Foreign Exchange Markets
Most of the existing empirical literature on FX market microstructure uses indicative quote data derived from Reuters EFX screens. This paper examines...
