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Diego Caballero

Risk Management

Division

Risk Analysis

Current Position

Financial Risk Expert

Fields of interest

Mathematical and Quantitative Methods,Financial Economics

Email

Diego.Caballero@ecb.europa.eu

Education
2016

Ph.D. Physics, Yale University, New Haven, USA

2013

M.Phil. Physics, Yale University, New Haven, USA

2011

M.S. Physics, Yale University, New Haven, USA

2010

B.S. Physics, Rice University, Houston, USA

25 January 2019
WORKING PAPER SERIES - No. 2225
Details
Abstract
We address the question to what extent a central bank can de-risk its balance sheet by unconventional monetary policy operations. To this end, we propose a novel risk measurement framework to empirically study the time-variation in central bank portfolio credit risks associated with such operations. The framework accommodates a large number of bank and sovereign counterparties, joint tail dependence, skewness, and time-varying dependence parameters. In an application to selected items from the consolidated Eurosystem's weekly balance sheet between 2009 and 2015, we find that unconventional monetary policy operations generated beneficial risk spill-overs across monetary policy operations, causing overall risk to be nonlinear in exposures. Some policy operations reduced rather than increased overall risk.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
26 September 2019
RESEARCH BULLETIN - No. 62
Details
Abstract
This article studies this question by revisiting the Eurosystem's experience during the euro area sovereign debt crisis between 2010 and 2012. In some instances, the Eurosystem was able to remove excess risk from parts of its balance sheet by extending the scale of its operations, in line with Bagehot's well-known assertion that occasionally "the brave plan is the safe plan."
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
Network
Research Task Force (RTF)
2019
Journal of Monetary Economics
  • Caballero, D., Lucas, A., Schwaab, B., Zhang, X.