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Simulating stress across the financial system: the resilience of corporate bond markets and the role of investment funds

Author

Listed:
  • Baranova, Yuliya

    (Bank of England)

  • Coen, Jamie

    (Bank of England)

  • Noss, Joseph

    (Bank of England)

  • Lowe, Pippa

    (Bank of England)

  • Silvestri, Laura

    (Bank of England)

Abstract

This paper provides a first step in developing a system-wide stress simulation. The model incorporates several important features of the financial system. These include several types of institution (including banks and non-banks) and how their actions may propagate and amplify stress. Rather than attempting to predict outcomes of a given stress scenario for financial sector balance sheets, it seeks to explore those conditions under which systemic stress may crystallise.

Suggested Citation

  • Baranova, Yuliya & Coen, Jamie & Noss, Joseph & Lowe, Pippa & Silvestri, Laura, 2017. "Simulating stress across the financial system: the resilience of corporate bond markets and the role of investment funds," Bank of England Financial Stability Papers 42, Bank of England.
    • Handle: RePEc:boe:finsta:0042
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-paper/2017/simulating-stress-across-the-financial-system-resilience-of-corporate-bond-markets.pdf?la=en&hash=C28EF509958C424DE474CADE1BBC137A7D4C0523
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    More about this item

    Keywords

    stress simulation; corporate bonds; investment funds; dealers; market liquidity; systemic stress; amplification;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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