Systems and Systemic Risk in Finance and Economics
This paper examines the concept of systemic risk and provides an intuitive account of the economic thought on systems and the development of the...
Walrasian Foundations for Equilibria in Segmented Markets
We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged...
Market Quality and Contagion in Fragmented Markets
Financial market liquidity has become increasingly fragmented across multiple trading platforms. We propose an intuitive welfare-based market quality...
Foresight: The Future of Computer Trading in Financial Markets
SRC researchers were involved in a study that explores how computer generated trading in financial markets will evolve over the next 10 years. The...
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...
Endogenous Liquidity and Contagion
Market liquidity is typically characterized by a number of ad hoc metrics, such as depth, volume, bid-ask spreads etc. No general coherent definition...
Strategic financial innovation in segmented markets
We study a model with restricted investor participation in which strategic arbitrageurs reap profits by exploiting mispricings across different market...
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...
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...
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...
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...
Rational limits to arbitrage
It is often argued that asset prices exhibit patterns incompatible with the behaviour of rational, optimising agents. This paper proposes a rational...
On Physics and Finance
This paper gives a short introduction of the academic field of financial asset pricing and relates some recent as well as historical developments in...
Arbitrage and Endogenous Market Integration
We analyze a general equlibrium model of strategic arbitraging and intermediation. Arbitrageurs take advantage of mispricings, market frictions and...
