Viral V. Acharya Books

The book delves into the unique factors behind the severe financial crisis of 2007-2009, focusing on the actions of large, complex financial institutions (LCFIs). It contends that these institutions deviated from their established securitization practices by retaining systemic tail risk rather than transferring it to other investors. This failure to manage risk effectively contributed significantly to the crisis, highlighting the vulnerabilities within the financial system during a period marked by a credit boom and housing bubble.

Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period. Lower loan exposure to sovereign risk is associated with greater protection selling in CDS, the effect being weaker when sovereign risk is high. Bank and country risk variables are mostly not associated with protection selling. The findings are driven by the actions of a few non-dealer banks which sold CDS protection aggressively at the onset of the crisis, but started covering their positions at its height while simultaneously shifting their assets towards sovereign bonds and loans. Our findings underscore the importance of accounting for derivatives exposure in building a complete picture and understanding fully the economic drivers of the bank-sovereign nexus of risk.

Experts from NYU Stern School of Business analyze new financial regulations and what they mean for the economyThe NYU Stern School of Business is one of the top business schools in the world thanks to the leading academics, researchers, and provocative thinkers who call it home. In "Regulating Wall Street: The New Architecture of Global Finance," an impressive group of the Stern school's top authorities on finance combine their expertise in capital markets, risk management, banking, and derivatives to assess the strengths and weaknesses of new regulations in response to the recent global financial crisis.Summarizes key issues that regulatory reform should addressEvaluates the key components of regulatory reformProvides analysis of how the reforms will affect financial firms and markets, as well as the real economyThe U.S. Congress is on track to complete the most significant changes in financial regulation since the 1930s. "Regulating Wall Street: The New Architecture of Global Finance" discusses the impact these news laws will have on the U.S. and global financial architecture.