Toni Ahnert is a Research Advisor in the Financial Stability Department at the Bank of Canada. He is a financial economist with interests in financial intermediation theory and global games. He received his Ph.D. in Economics from the London School of Economics and Political Science and is a member of the Finance Theory Group.
Staff Working Papers
Third parties often assume default risk at loan origination in return for a fee. Insurance, various guarantees and external credit enhancements protect the owner of the loan against borrower default. Governments often assume such default risk through guarantees for various types of loans, including mortgages, student loans and small business loans.
After the financial crisis of 2007–09, many jurisdictions introduced new banking regulations to make banks more resilient and less likely to fail. These regulations included tighter limits for the quality and quantity of bank capital and introduced minimum standards for liquidity. But what was the impact of these changes?
Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions.
We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk.
The scale of safe assets suggests a structural demand for a safe wealth share beyond transaction and liquidity roles. We study how investors achieve a reference wealth level by combining self-insurance and contingent liquidation of investment. Intermediaries improve upon autarky, insuring investors with poor self-insurance and limiting liquidation.
We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default.
We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability.
In this piece we show that a limit on the level of asset encumbrance and minimum capital requirements are effective tools for minimizing the incentive for banks to take excessive risk.
We analyze how a wealth shift to emerging countries may lead to instability in developed countries. Investors exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights.
We propose a novel theory of financial contagion. We study global coordination games of regime change in two regions with an initially uncertain correlation of regional fundamentals.
- "Asset Encumbrance, Bank Funding and Fragility"
(with Kartik Anand, Prasanna Gai, James Chapman), Review of Financial Studies, forthcoming.
- "Information Choice and Amplification of Financial Crises"
(with Ali Kakhbod), Review of Financial Studies, 30 (6), June 2017, Pages 2130-78.
- "Rollover Risk, Liquidity and Macroprudential Regulation"
Journal of Money, Credit and Banking, 48 (8), December 2016, Pages 1753-85.