"Why are spreads on corporate bonds so wide relative to expected losses from default? The spread on Baa-rated bonds, for example, has been about four times the expected loss. We suggest that the most commonly cited explanations--taxes, liquidity and systematic diffusive risk--are inadequate. We...

Researchers at central banks increasingly turn to counterfactual simulations to estimate the danger of contagion owing to exposures in the interbank loan market. The present paper summarises the findings of such simulations, provides a critical assessment of the modelling assumptions on which...

Banks and other lenders often transfer credit risk to liberate capital for further loan intermediation. This paper aims to explore the design, prevalence and effectiveness of credit risk transfer (CRT). The focus is on the costs and benefits for the efficiency and stability of the financial...

In the wake of the Asian financial crisis, many regimes in Asia adopted stricter provisioning requirements, as well as discretionary measures, with the objective of increasing provisioning in good times in response to rising levels of risk. Based on a final sample of 240 banks in 12 Asian...