This paper applies the methodology developed by Forte and Peña (2006) to extract the implied default point in the premium on credit default swaps (CDS). As well as considering a more extensive international sample of corporations (96 US, European and Japanese companies) and a longer time...

Model uncertainty hampers consensus on the main determinants of corporate default. We employ Bayesian model averaging (BMA) techniques in order to shed light on this issue. Empirical findings suggest that the most robust determinants of corporate default are firm-specific variables such as the...

This paper finds strong empirical support of a positive, although quite lagged, relationship between rapid credit growth and loan losses. Moreover, it contains empirical evidence of more lenient credit terms during boom periods, both in terms of screening of borrowers and in collateral...

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the distribution of loans returns. I use this model to describe the investment opportunity set of lenders using mean-variance analysis with a Value at Risk constraint. I also obtain closed...

We propose a new method for analysing multiperiod stress scenarios for portfolio credit risk more systematically than in the current practice of macro stress testing. Our method quantifies the plausibility of scenarios by considering the distance of the stress scenario from an average scenario....

Over the past years, several countries around the world have adopted a system of prudential prompt corrective action (PCA). The European Union countries are being encouraged to adopt PCA by policy analysts who explicitly call for its adoption. To date, most of the discussion on PCA has focused...

This article studies how the managers of a regulated firm can use debt and equity contracts to constrain the regulator’s policy through the contingent transfer of control to external investors with high relative liquidation value. External finance increases regulated income and facilitates...

Taking advantage of a rich database of more than 1 million companies in Spain, France and the U.K., we propose and test a hypothesis to explain why Spain has one of the world’s lowest business bankruptcy rates, even during the current economic crisis and after controlling for market exit...