The law, economics and policy of financial innovation: Selected topics

(1) Financial innovation and transparency: Should the stringency of the transparency rules be a function of the risk that each product or institution entails? The project will analyse best practices and lessons drawn from FTAs, but it will also critically evaluate the limits of such provisions.
(2) State of the art in prudential measures relating to novel financial products: This paper will highlight the work on prudential regulations and regulatory cooperation notably by the BCBS. The focus will be on structured financial products and derivatives. A thorough examination of the current pro-regulation stance is also offered.
(3) Subsidies in financial services: This paper will examine the dubious nature of current tax breaks, bailouts and fiscal stimuli granted to domestic banks. It will analyse the legal aspects of such policies in the light of the GATS obligations, the SCM Agreement and the relevant case-law.
(4) Financial innovation and tail risk: Tail risk refers to the potential losses under extreme circumstances, such as a severe recession or a stock market crash. The possibilities for taking on such risk have increased significantly in recent years due to the enormous growth in financial innovation. In this project a market-based approach will be developed, where information about bank tail-risk is extracted from their share prices.
(5) Credit default swaps (CDS) and the pricing of risks in financial markets: Credit derivatives provide banks with various methods for hedging and transferring credit risks. In their most common form, the CDS, they insure against the default of a credit in return for a periodic payment to the seller of protection. In this project we analyse how these new markets contribute to the informational efficiency of financial markets.