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Kjell G. Nyborg
SFI Senior Chair
Professor of Finance
  +41 44 634 29 80
  kjell.nyborg@sfi.ch   http://nyborg.ch/
Kjell Nyborg is Professor of Finance at the University of Zurich and has held an SFI Senior Chair since 2009. He graduated from Stanford University with a PhD in Finance. Prof. Nyborg has published extensively in his areas of expertise and has spent research periods at the European Central Bank, the Deutsche Bundesbank, the Bank of Norway, and Stanford University. He is President of the European Finance Association for 2017.
Research Interests:
His research interests include the role of money in financial markets, central banking and banking, liquidity, collateral, valuation, and corporate finance.
Recent Research:
In a recent study, Prof. Nyborg and his coauthors study the processes at work behind the rapid growth and change in the composition of central banks’ balance sheets. This work contributes to the novel and growing literature on central bank collateral policy featured, for example, in Prof. Nyborg’s recent book on the topic. In this more recent work, the researchers find evidence of systemic arbitrage whereby banks funnel credit risk and low-quality collateral to the central bank. That is, weaker banks use lower quality collateral to borrow more from the Eurosystem than stronger banks. In Eurosystem repos, solvent banks are obliged to provide additional collateral in case the collateral value of their pledged assets falls short of their outstanding credit. The Eurosystem’s exposure is therefore confined to the risk that a bank fails while at the same time the pledged collateral does not cover the outstanding credit. In short, systemic arbitrage increases overall risk, worsens the Eurosystem’s balance sheet, and puts taxpayers’ money at risk. Systemic arbitrage may also be a contributing factor to financial fragmentation in the euro area. In terms of policy recommendations, systemic risk could be prevented if a bank’s default risk was correctly reflected in the rates at which it obtains credit from the Eurosystem.