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...
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...
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...
