How banks have adjusted to higher capital requirements

Capital regulation reform requires banks to hold a much higher ratio of core capital to risk-weighted assets, taking some toll on lending and economic...

The side-effects of non-conventional monetary policy

A BIS summary of research gives a nice overview on non-conventional monetary policies and their unintended systemic consequences. Current policies appear to yield diminishing returns in terms...

The volatility paradox

Brunnermeier and Sannikov illustrate in a formal model why fundamental risk and asset market volatility can be out of sync. They focus on endogenous...

The “net stable funding ratio”: a basic briefing

The “net stable funding ratio” is a quantitative liquidity standard for regulated banks, scheduled to go into effect in 2018. It will require stable...

Shadow banking: A review of the basics

The New York Fed’s Economic Policy Review provides a basic overview of past and current shadow banking activities in the U.S. and beyond. Securitization...

How statistical risk models increase financial crisis risk

Regulators and financial institutions rely on statistical models to assess market risk. Alas, a new Federal Reserve paper shows that risk models are prone...

Shadow banking and the backstop problem

Modern shadow banking provides large-scale risk transformation services that are highly pro-cyclical (view post here). This is a systemic concern mainly for one reason:...

Sovereign Wealth Funds: The very basics

Sovereign wealth funds now hold assets worth roughly 4% of global GDP, and are governed by politically-mandated investment objectives. A new IMF paper gives an...

Rules of thumb for banking and currency crisis risk

A new ECB paper explores macroeconomic indicators for banking and currency crises over the past 40 years. Banking crises arose mostly in constellations of...

When does shadow banking become a problem?

A new ECB paper explains key risk factors of shadow banking. First, if unregulated finance outgrows market size, tightening liquidity can escalate into runs...

RECENT ARTICLES

Prospect theory value as investment factor

Prospect theory value as investment factor Prospect theory value is a valid investment factor, particularly in episodes of apparent market inefficiency. Prospect theory is a...

Understanding international capital flows and shocks

Macro trading factors for FX must foremostly consider (gross) external investment positions. That is because modern international capital flows are mainly about financing, i.e....

R tidyverse for macro trading research

The tidyverse is a collection of packages that facilitate data science with R. It is particularly powerful for macro trading research because it...

POPULAR ARTICLES