Radoslav Raykov is a Principal Researcher at the Financial Stability Department at the Bank of Canada. He holds a B.A. in Economics from Harvard University and a Ph.D. in Economics from Boston College. Prior to joining the Bank, he worked at the Boston Fed and taught at Harvard University.
His research interests focus broadly on financial stability, and in particular, on: systemic risk, banking regulation and reform, and derivatives markets.
The Bank of Canada completed its first resolution plan for the Canadian Derivatives and Clearing Corporation (CDCC) in 2024. To estimate the resolution costs, we apply the extreme value theory method to simulate the credit losses that would result from extreme scenarios where multiple clearing members default at the same time.
Derivatives exchanges often determine collateral requirements, which are fundamental to market safety, with dated risk models assuming normal returns. However, derivatives returns are heavy-tailed, which leads to the systematic under-collection of collateral (margin). This paper uses extreme value theory (EVT) to evaluate the cost of this margin inadequacy to market participants in the event of default.
Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks.
Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses?
Bank regulation presumes risks spill over more easily from large banks to the banking system than vice versa. Interestingly, we observe this is not the case. We find that the capacity to transmit risk is larger in the system-to-bank direction, leading to an increased default risk.
This paper explores how the Canadian futures market contributed to banks’ systemic risk during the 2008 financial crisis. It finds that core banks as a whole traded against the periphery, in this way increasing their risk of simultaneous losses.
"Decomposing Large Banks’ Systemic Trading Losses" IMF Economic Review, forthcoming.
"Systemic Risk and Collateral Adequacy: Evidence from the Futures Market" Journal of Financial and Quantitative Analysis, 2021.
"Holding Company Affiliation and Bank Stability: Evidence from the US Banking Sector" (joint with Consuelo Silva-Buston) Journal of Corporate Finance, 65, December 2020.
“Risk Mutualization and Financial Stability: Recovering and Resolving a Central Counterparty” Journal of Financial Market Infrastructures, 2018.
"Reducing Margin Procyclicality at Central Counterparties" Journal of Financial Market Infrastructures, 7(2), 2018.
