SYSTEMIC RISK & FINANCIAL STABILITY
Tackling the Volatility Paradox: Persistence and Systemic Risk
Spillover Persistence reflects how fast the financial system reacts to a firm's losses. Supporting recent macro-finance theory, it provides new information about fragility and amplification in the financial system: persistence declines when crises and stock market bubbles build up, and it increases during crises and with fire sales.
Presentations at the Eastern Finance Association (2021), IWH-FIN-FIRE Workshop (2020), 7th Workshop in Financial Economics at University of Bonn (2018), AFA (2017, Poster), German Finance Association (2017), ARIA (2016), Huebner Doctoral Colloquium (2016), EGRIE (2016), and seminars at University of Bonn (2020), Deutsche Bundesbank (2017), MIT Sloan (2017), Isenberg School of Management at UMASS Amherst (2017), University of Guelph (2017), St. John's University New York (2017), University of Jena (2016), and Goethe-University Frankfurt (2016).
Life insurance convexitywith Nicolaus Grochola and Helmut GründlFormer title: "Rising Interest Rates and Liquidity Risk in the Life Insurance Sector"
When interest rates rise, policyholders become more likely to terminate their life insurance savings contracts and withdraw an ex-ante guaranteed account value. This convexity can trigger significant fire sale externalities when interest rates hike.
Presentations at SGF (2021), DVfVW (2021), ARIA-AEA session (2021), Paris December Finance Meeting (2020), 8th Bundesbank-CFS-ECB Workshop on Macro and Finance (2018), EIOPA (2018), International Actuarial Association - Life Section (IAALS) Colloquium (2017), and seminars at ECB (2020), University of Bonn (2019), St. John's University New York (2018), Isenberg School of Management, UMASS Amherst (2018), Goethe-University Frankfurt (2018), and Deutsche Bundesbank (2017).
Policy: - featured in - EIOPA's financial stability report 2020- ESRB's suggestions on how to improve regulation of insurers (02/2020) - policy talk on liquidity risk in life insurance @Goethe, 01/2020 [Slides]
Loss Sharing in Central Clearinghouses: Winners and Losers with Loriana Pelizzon and Mila Getmansky Sherman (SAFE Working Paper No. 235, ECONtribute Discussion Paper No. 66, ICIR Working Paper No. 31)Former title: "Pitfalls of Central Clearing in the Presence of Systematic Risk"
Central clearing of derivatives substantially favors dealers with flat portfolios over end-users with directional portfolios. Sharing default losses proportionally to gross instead of net risk can align benefits.
Presentations at CEBRA (2020), AFA (2020), SIAM Financial Mathematics and Engineering (2019), Conference on the Regulation and Operation of Modern Financial Markets (2019), ECB Money Market Workshop (2018), SAFE conference (2018), and seminars at University of Oxford (2020), Villanova University (2019), Isenberg School of Management, UMASS Amherst (2018), Goethe-University Frankfurt (2018), and ESMA (2017).
INSURANCE AND SELECTION MARKETS
Constrained efficient equilibria in selection markets with continuous types with Irina Gemmo and Casey Rothschild Journal of Public Economics (2020) 190:104237
In adverse selection models, it is complicated to work with constrained efficient equilibria. We extend the well-known Miyazaki-Wilson-Spence equilibrium to continuous type spaces and formulate a simple algorithm to compute it, facilitating future empirical work.
Financial Literacy and Precautionary Insurancewith Annette Hofmann and Petra Steinorth (ICIR Working Paper No. 34)
When consumers are very prudent, they buy too much insurance.
Presentations at the Risk Theory Society (2019), EGRIE (2018) and seminars at Goethe-University Frankfurt (2018), and St. John's University New York (2018).