Sehr geehrte Damen und Herren! Anbei übermitteln wir Ihnen die Einladung zu einem VOSTA-Freitagsseminar von Rama Cont (Imperial College London) und Eric Schaanning (Imperial College and Norges Bank), mit dem Titel "Fire sales, indirect contagion and systemic stress-testing". Termin Freitag, 9. Juni 2017, 11.00 Uhr Ort Oesterreichische Nationalbank - GELDZENTRUM Garnisongasse 15, 1090 Wien Veranstaltungssaal, Geldzentrum, 3.OG Abstract We present a framework for modelling the phenomenon of fire sales in a network of financial institutions with common asset holdings, subject to leverage or capital constraints. Asset losses triggered by macro shocks may interact with portfolio constraints, resulting in liquidation of assets, which in turn a affects market prices, leading to contagion of losses when portfolios are marked to market. If mark-to-market losses are large, this may in turn lead to a new round of fire sales. In contrast to balance sheet contagion mechanisms based on direct linkages, this price mediated contagion is transmitted through common asset holdings, which we quantify through liquidity-weighted overlaps across portfolios. Exposure to price-mediated contagion leads to the concept of indirect exposure to an asset class, as a consequence of which the risk of a portfolio depends on the matrix of asset holdings of other large and leveraged portfolios with similar assets. Our model provides an operational systemic stress testing method for quantifying the exposure of the financial system to these effects. Using data from the European Banking Authority, we apply this method to the examine the exposure of the EU banking system to price-mediated contagion. Our results indicate that, even with optimistic estimates of market depth, moderately large macro-shocks may trigger fire sales which then lead to substantial losses across bank portfolios, modifying the outcome of bank stress tests. Moreover, we show that price-mediated contagion leads to a heterogeneous cross-sectional loss distribution across banks, which cannot be replicated simply by applying a macro-shock to bank portfolios in absence of fire sales. We propose a bank-level Indicator, based on the analysis of liquidity weighted overlaps across bank portfolios, which is shown to be strongly correlated with bank losses due to fire sales and may be used to quantify the contribution of a financial institution to price-mediated contagion. Unlike models based on 'leverage targeting', which assume symmetric reactions to gains or losses, our approach is based on the asymmetric interaction of portfolio losses with one sided constraints such as leverage or capital requirements, makes a distinction between insolvency and illiquidity and leads to substantially different loss estimates is stress scenarios. Um Ihre Rückmeldung ersuchen wir bis Mittwoch, 7. Juni 2017. Wir freuen uns auf Ihre Teilnahme und stehen für Fragen gerne zur Verfügung. Mit freundlichen Grüßen, Event-Management Communications and Financial Literacy Division Oesterreichische Nationalbank Otto-Wagner-Platz 3, 1090 Vienna, Austria T +43(0)1 404 20 6620 event-management@oenb.at<mailto:event-management@oenb.at> www.oenb.at<http://www.oenb.at> Diese E-Mail kann vertrauliche Informationen enthalten und irrtümlich an Sie gelangt sein. In diesem Fall informieren Sie bitte sofort die Absenderin bzw. den Absender und vernichten Sie diese E-Mail. Das unerlaubte Kopieren sowie die unbefugte Weitergabe dieser Mail oder von Teilen dieser Mail sind nicht gestattet.