Regulatory Cliff Effects and Systemic Risk

Andreas Brøgger, Graeme Stuart Cokayne

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

This paper investigates systemic risks arising from regulatory cliff effects. Sudden discrete changes to asset properties, from regulatory cliff effects, cause financial agents to act simultaneously in a homogeneous way, exacerbating systemic risk. We develop a model which quantifies these effects, and find that under certain circumstances, even small changes have drastic consequences. Taking the model to the data, we find that current market measures imply that the circumstances are satisfied for the Danish financial system.
Original languageEnglish
Publication date2018
Number of pages44
Publication statusPublished - 2018
Event2018 Financial Management Association European Conference - University of Agder, Kristiansand, Norway
Duration: 13 Jun 201815 Jun 2018
http://www.fmaconferences.org/Norway/NorwayProgram.htm

Conference

Conference2018 Financial Management Association European Conference
LocationUniversity of Agder
CountryNorway
CityKristiansand
Period13/06/201815/06/2018
Internet address

Keywords

  • Banking
  • Regulation
  • Systemic risk
  • Fire sales
  • Covered bonds

Cite this

Brøgger, A., & Cokayne, G. S. (2018). Regulatory Cliff Effects and Systemic Risk. Paper presented at 2018 Financial Management Association European Conference, Kristiansand, Norway.
Brøgger, Andreas ; Cokayne, Graeme Stuart. / Regulatory Cliff Effects and Systemic Risk. Paper presented at 2018 Financial Management Association European Conference, Kristiansand, Norway.44 p.
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Brøgger, A & Cokayne, GS 2018, 'Regulatory Cliff Effects and Systemic Risk' Paper presented at, Kristiansand, Norway, 13/06/2018 - 15/06/2018, .

Regulatory Cliff Effects and Systemic Risk. / Brøgger, Andreas; Cokayne, Graeme Stuart.

2018. Paper presented at 2018 Financial Management Association European Conference, Kristiansand, Norway.

Research output: Contribution to conferencePaperResearchpeer-review

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AU - Brøgger, Andreas

AU - Cokayne, Graeme Stuart

PY - 2018

Y1 - 2018

N2 - This paper investigates systemic risks arising from regulatory cliff effects. Sudden discrete changes to asset properties, from regulatory cliff effects, cause financial agents to act simultaneously in a homogeneous way, exacerbating systemic risk. We develop a model which quantifies these effects, and find that under certain circumstances, even small changes have drastic consequences. Taking the model to the data, we find that current market measures imply that the circumstances are satisfied for the Danish financial system.

AB - This paper investigates systemic risks arising from regulatory cliff effects. Sudden discrete changes to asset properties, from regulatory cliff effects, cause financial agents to act simultaneously in a homogeneous way, exacerbating systemic risk. We develop a model which quantifies these effects, and find that under certain circumstances, even small changes have drastic consequences. Taking the model to the data, we find that current market measures imply that the circumstances are satisfied for the Danish financial system.

KW - Banking

KW - Regulation

KW - Systemic risk

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KW - Covered bonds

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KW - Regulation

KW - Systemic risk

KW - Fire sales

KW - Covered bonds

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Brøgger A, Cokayne GS. Regulatory Cliff Effects and Systemic Risk. 2018. Paper presented at 2018 Financial Management Association European Conference, Kristiansand, Norway.