Simulating Stress Across the Financial System: The Resilience of Corporate Bond Markets and the Role of Investment Funds

27 Pages Posted: 6 Mar 2018

See all articles by Yuliya Baranova

Yuliya Baranova

Bank of England

Jamie Coen

Bank of England

Joseph Noss

Bank of England

Pippa Lowe

Bank of England

Date Written: July 12, 2017

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.

Keywords: stress simulation, corporate bonds, investment funds, dealers, market liquidity, systemic stress, amplification

JEL Classification: G01, G11, G12, G14, G19, G23, G24

Suggested Citation

Baranova, Yuliya and Coen, Jamie and Noss, Joseph and Lowe, Pippa, Simulating Stress Across the Financial System: The Resilience of Corporate Bond Markets and the Role of Investment Funds (July 12, 2017). Bank of England Financial Stability Paper No. 42, Available at SSRN: https://ssrn.com/abstract=3134656

Yuliya Baranova

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Jamie Coen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Joseph Noss (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Pippa Lowe

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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