We develop a model where institutions form connections through swaps of projects in order to diversify their individual risk. These connections lead to two different network structures. In a clustered network groups of financial institutions hold identical portfolios and default together. In an...

This paper models bank asset choice when shareholders know more about loan quality than do outsiders. Because of this informational asymmetry, the price of loans in the secondary market is the price for poor quality loans. Banks desire to hold marketable securities in order to avoid liquidating...

We consider the problem of optimally selecting a large portfolio of risky loans, such as mortgages, credit cards, auto loans, student loans, or business loans. Examples include loan portfolios held by financial institutions and fixed-income investors as well as pools of loans backing mortgage-...

Existing literature has demonstrated that loan syndication factors can affect banks performance. Good financial performance rewards the shareholders for their investment efforts and in turn, motivates them for additional investment and enables economic growth. On the other hand, underperformance...

This paper examines bank portfolio management under banking regulation and asymmetric information about borrower types and screening by banks and imperfect competition in the credit market. A bank tries to maximize expected profits subject to a portfolio variance constraint. The analysis yields...

The Current Expected Credit Loss (CECL) framework represents a new approach for calculating the allowance for credit losses. Credit cards are the most common form of revolving consumer credit and are likely to present conceptual and modeling challenges during CECL implementation. We look back at...

This paper derives a closed form formula for value at risk (VaR) and expected shortfall (ES) under a widely used Merton type multi-factor model for a credit portfolio with guaranteed loans.Typically used Monte Carlo simulations tend to converge slowly when the default probabilities are low and...

The objective of this paper is to empirically determine the factors that impact bank interest margins in China. We use relevant banking data for the period 1998-2015. Importantly, we examine, how the composition of assets and liabilities impacts interest margins. To our knowledge this aspect has...