EconPapers    
Economics at your fingertips  
 

Balance Sheet Capacity and Endogenous Risk

Jon Danielsson (), Hyun Song Shin and Jean-Pierre Zigrand ()

FMG Discussion Papers from Financial Markets Group

Abstract: 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 depends on total bank capital. Equilibrium risk and market risk premiums can be solved in closed form as functions of aggregate bank capital. We explore the empirical properties of the model in light of recent experience in the financial crisis and highlight the importance of balance sheet capacity as the driver of the financial cycle and market risk premiums.

Date: 2011-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28) Track citations by RSS feed

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionP ... nceSheetCapacity.pdf (application/pdf)

Related works:
Working Paper: Balance sheet capacity and endogenous risk (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp665

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().

 
Page updated 2019-05-14
Handle: RePEc:fmg:fmgdps:dp665