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This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies for risks related to loan losses, the ratio of interest income to total loans and solvency perspectives.

Using a large sample of different types of Swedish financial institutions, this paper uses a panel framework to examine the relationships between abnormal loan growth rates and loan losses, interest income as a percentage of total loans, changes in the equity to assets ratio and changes in z-score.

The findings show two important points of evidence. First, abnormal lending to retail customers increases loan losses and interest income in relation to total loans. Second, abnormal lending to other credit institutions decreases loan losses and significantly changes the capital structure by increasing the reliance on debt funding and significantly improves the z-score measure.

The findings provide useful implications for the management of loan portfolios for a wide range of Swedish financial institutions, identifying two components: abnormal lending to households may increase loan losses and increase interest income in relation to total loans, and excessive lending to other credit institutions may reduce solvency risk and allow more debt financing for the financial institution.

This is the first study to use a panel framework in analyzing the behavior of different types of Swedish financial institutions in relation to loans granted to retail customers and other credit institutions.

The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium, and how these relationships were affected by the quantitative easing (QE) announcements by the Federal Reserve.

The empirical analysis employs a multivariate exponential generalized autoregressive conditionally heteroskedastic (VAR-EGARCH) specification, which includes the USA, the UK, Germany, France and Switzerland.

Two main findings are raised from the empirical analysis. First, the VAR-EGARCH model identifies statistically significant spillover effects identifying the USA as the leading source driving investors’ risk aversion. Second, unconventional monetary easing announcement by the Fed has had significant effects on investors’ risk perspectives.

Accounting for the dynamic volatility of variance premium inter-dependencies, the authors show that the correlations among variance premia increase during the QE announcements by the Federal Reserve, suggesting a herding behavior that may potentially lead to stock price bubbles and undermine financial stability.

This is an empirical attempt that investigates the unexplored effects of unconventional monetary policy decisions in relation with investors’ attitudes toward risk.

The authors aim to investigate the cointegrating relationship of the government bond yields, driven by the common money factors in European Monetary Union (EMU).

By adopting a dynamic ARDL transformation, the paper provides short-/long-term estimates of bond yields convergence before the burst of the current debt crisis. It also investigates how the degree of convergence between bond yields, driven by money factors, is affected in short/long runs.

The findings indicate that the introduction of the common currency has not a uniform effect on the bond yields, and there is a nominal convergence between EMU bond yields based on money market determinants.

The current financial crisis indicates that the EMU bond market convergence was temporary and it can be highly affected by an exogenous shocks and the sentiment of international investors. The findings imply the necessity for a common monetary and fiscal policy in Euro zone countries.

The purpose of this paper is to analyse the importance of interbank connections and shocks on banks’ capital ratios to financial stability by looking at a network comprising a large number of European and UK banks.

The authors model interbank contagion using insights from the Susceptible Infected Recovered model. The authors construct scale-free networks with preferential attachment and growth, applying simulated interbank data to capture the size and scale of connections in the network. The authors proceed to shock these networks per country and perform Monte Carlo simulations to calculate mean total losses and duration of infection. Finally, the authors examine the effects of contagion in terms of Core Tier 1 Capital Ratios for the affected banking systems.

The authors find that shocks in smaller banking systems may cause smaller overall losses but tend to persist longer, leading to important policy implications for crisis containment.

The authors infer the interbank domestic and cross-border exposures of banks employing an iterative proportional fitting procedure, called the RAS algorithm. The authors use an extend sample of 169 European banks, that also captures effects on the UK as well as the Eurozone interbank markets. Finally, the authors provide evidence of the contagion effect on each bank by allowing heterogeneity. The authors compare the bank’s relative financial strength with the contagion effect which is modelled by the number and the volume of bilateral connections.

The purpose of this paper is to show how the influence of the diffusion speed of a financial innovation (FI) increases the operational risk (OR) in any business line with different rate.

A stochastic model is considered presenting the influence of diffusion speed of FIs in order to validate the OR, without taking into consideration any external factors that create OR. Under specific hypotheses, the model presents the variance and the fluctuation of total OR in time and internal business lines of a financial institute because of the influence of an FI with a random degree of access (r).

FIs and OR and, their role in various financial organizations, are examined. The model suggests that an FI is more likely to occur and spread in production lines that have a great cross‐correlation with an increasing OR, without taking into consideration the external environment.

The originality of the paper is the stochastic relation between FIs and OR and the way that OR increases in any business line because of the influence of the diffusion speed of an FI.