Regulatory Cliff Effects and Systemic Risk

Andreas Brøgger, Graeme Stuart Cokayne

Research output: Contribution to conferencePaperResearchpeer-review


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


Conference2018 Financial Management Association European Conference
LocationUniversity of Agder
Internet address


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

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