In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically...

We study the economic role of banks’ soft information, which evolved from repeated lending relationships, in the context of loan default. Using a proprietary database from one of the largest state-owned commercial banks in China, we find that the bank’s internal credit rating scores play a...

This paper analyzes the determinants of interest margins in the Colombian Financial System. Based on the model by Ho and Saun- ders (1981), interest margins are modelled as a function of the pure spread and bank-speci¯c institutional imperfections using quarterly data for the period...

In 2001, government guarantees for savings banks in Germany were removed following a law suit. We use this natural experiment to examine the effect of government guarantees on bank risk taking, using a large data set of matched bank/borrower information. The results suggest that banks whose...

We propose a new method for measuring the quality of banks credit portfolios. This method makes use of information impounded in bank share prices by exploiting differences in their sensitivity to credit default swap spreads of borrowers of varying quality. The method allows us to derive a credit...

This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of financial activities and their ability to withstand a banking sector crash. We first generate market-based measures of banks’ systemic risk exposures using extreme value...

The financial crisis of the late 2000's highlighted the importance of strengthening risk management systems in financial markets. Consequently, an increasing interest in strategies to quantify risk under extreme scenarios has spawned. One of such techniques is CrashMetrics, a methodology for...

Informational constraints may turn the Merton Model for corporate credit risk impractical. Applying this framework to the Colombian financial sector is limited to four stock-market-listed firms; more than a hundred banking and non-banking firms are not listed. Within the same framework, firms’...

In Colombia, the exposition to market risk has increased significantly since 2009. Nonetheless, the risk codependence among agents has not been analyzed yet from the perspective of this risk. Therefore, this paper presents an approach to estimate such relevance based on CoVaR and quantile...

En este trabajo se analizan algunos aspectos de la regulación relacionada con el manejo del riesgo de mercado establecida por la Superintendencia Financiera de Colombia, donde se propone el valor en riesgo (VaR) como la medida para cuantificar este tipo de riesgo. No obstante, esta regulación...