FSRC - Financial System Research Center

• Loan Insurance, Market Liquidity, and Lending Standards

  Staff Working Paper 2019-47 Toni Ahnert, Martin Kuncl

  We examine loan insurance—credit risk transfer upon origination—in a model in which lenders can screen, learn loan quality over time, and can sell loans. Some lenders with low screening ability insure, benefiting from higher market liquidity of insured loans while forgoing the option to exploit future information about loan quality.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies JEL Code(s): G, G0, G01, G2, G21, G28

• Extreme Downside Risk in Asset Returns

  Staff Working Paper 2019-46 Lerby Ergun

  Financial markets can experience sudden and extreme downward movements. Investors are highly concerned about the performance of their assets in such scenarios. Some assets perform badly in a downturn in the market; others have milder reactions.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): C, C1, C14, G, G1, G11, G12

• Interconnected Banks and Systemically Important Exposures

  Staff Working Paper 2019-44 Alan Roncoroni, Stefano Battiston, Marco D’Errico, Grzegorz Halaj, Christoffer Kok

  How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability JEL Code(s): C, C6, C63, G, G1, G15, G2, G21
• November 19, 2019

  Researching the Economic Impacts of Climate Change

  Miguel Molico

  The Bank of Canada has a mandate to “promote the economic and financial welfare of Canada,” primarily through the conduct of monetary policy and promotion of a safe, sound and efficient financial system. Understanding the macroeconomic and financial system impacts of climate change and the transition to a low-carbon economy is therefore a priority for the Bank.

  Content Type(s): Staff research, Other Topic(s): Climate change

• The Economics of Cryptocurrencies—Bitcoin and Beyond

  Staff Working Paper 2019-40 Jonathan Chiu, Thorsten Koeppl

  Since the creation of Bitcoin in 2009, over 2,000 cryptocurrencies have been issued. We evaluate how well a cryptocurrency functions as a payment system.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Monetary policy, Payment clearing and settlement systems JEL Code(s): E, E4, E5, L, L5

• Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design

  Staff Working Paper 2019-30 Jason Allen, Robert Clark, Brent Hickman, Eric Richert

  Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial institutions JEL Code(s): C, C5, C57, D, D4, D44, G, G2, G21