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Systemic Risk in the Financial Sector: What Can We Learn from Option Markets?
(2014-12-14)
We propose a novel approach on how to estimate systemic risk and identify its key determinants. For US financial companies with publicly traded equity options, we extract option-implied value-at-risks and measure the ...
Who Invests in Home Equity to Exempt Wealth from Bankruptcy?
(2013-05-01)
Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios ...
Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis
(2016-10-01)
We design a novel test for changes in market discipline based on the relation between firm-specific risk, credit spreads, and equity returns. We use our method to analyze the evolution of bailout expectations during the ...
Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort Under an Incomplete Contract
(2017-10-10)
We investigate the implications of providing loan officers with a non-linear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial ...
Insurance Activities and Systemic Risk
(2015-12-01)
This paper investigates systemic risk in the insurance industry. We first analyze the systemic contribution of the insurance industry vis-à-vis other industries by applying 3 measures, namely the linear Granger causality ...
The Forward-looking Disclosures of Corporate Managers: Theory and Evidence
(2016-07-15)
We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making ...
Estimation and Model-Based Combination of Causality Networks
(2017-01-31)
Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used Granger causality to detect the presence of contemporaneous links between financial institutions ...
Natural Disaster and Bank Stability: Evidence from the U.S. Financial System
(2018-04-01)
We show that property damages from weather-related natural disasters significantly weaken the stability of banks with business activities in affected regions, as reflected in lower z-scores, higher probabilities of default, ...
Systemic risk for financial institutions of major petroleum-based economies: The role of oil
(2017-11-05)
This paper examines the relationship between oil price movements and systemic risk of many financial institutions in major petroleum-based economies. We estimate ?CoVaR for those institutions and thereby observe the presence ...
What Drives Banks' Geographic Expansion? The Role of Locally Non-Diversifiable Risk
(2019-03-06)
We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the United States ...