Investment fund sector needs stress tests – Bundesbank paper
Researchers say their model finds investment firms can magnify losses from global asset price shock
A working paper published by the Deutsche Bundesbank presents a model for macro-prudential stress tests of the investment firm sector.
In Connected funds, Daniel Fricke and Hannes Wilke argue that macro-prudential regulators need to pay more attention to the non-bank financial sector, and especially investment firms. The investment firm sector, they say, is vulnerable to shortages of liquidity and runs on firms, similar to banking runs.
“There is ample evidence that investment funds’ fire
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