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Acharya, Viral V; Gale, Douglas M; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2009

We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case of default. We show that debt capacity depends on how information about the quality of the asset is revealed. When the information structure is based on “optimistic”...

Persistent link: https://www.econbiz.de/10004980204

Credit Risk and Dynamic Capital Structure Choice

Dangl, Thomas; Zechner, Josef - C.E.P.R. Discussion Papers - 2003

This Paper analyses the effect of dynamic capital structure adjustments on credit risk. Firms may optimally adjust their leverage in response to stochastic changes in firm value. It is shown that capital structure dynamics lower optimal initial leverage ratios but increase both fair credit...

Persistent link: https://www.econbiz.de/10005123682

Economic and Regulatory Capital: What is the Difference?

Elizalde, Abel; Repullo, Rafael - C.E.P.R. Discussion Papers - 2004

This Paper analyses the determinants of regulatory capital (the minimum required by regulation) and economic capital (the capital that shareholders would choose in absence of regulation) in the context of the single risk factor model that underlies the New Basel Capital Accord (Basel II). The...

Persistent link: https://www.econbiz.de/10005123827

Does Competition Reduce the Risk of Bank Failure?

Martinez-Miera, David; Repullo, Rafael - C.E.P.R. Discussion Papers - 2008

account, a U-shaped relationship between competition and the risk of bank failure generally obtains. …

Persistent link: https://www.econbiz.de/10005124382

The Role of Non-financial Factors in Internal Credit Ratings

Grunert, Jens; Norden, Lars; Weber, Martin - C.E.P.R. Discussion Papers - 2002

Internal credit ratings are expected to gain in importance because of their potential use for determining regulatory capital adequacy and banks’ increasing focus on the risk-return profile in commercial lending. Therefore, the components of internal credit ratings merit not only a qualitative...

Persistent link: https://www.econbiz.de/10005067587

Interest Rates and Credit Risk

González-Aguado, Carlos; Suarez, Javier - C.E.P.R. Discussion Papers - 2011

This paper explores the effects of shifts in interest rates on corporate leverage and default. We develop a dynamic model in which the relationship between firms and their outside financiers is affected by a moral hazard problem and entrepreneurs' initial wealth is scarce. The endogenous link...

Persistent link: https://www.econbiz.de/10009024482

Monetary policy, bank bailouts and the sovereign-bank risk nexus in the euro area

Fratzscher, Marcel; Rieth, Malte - C.E.P.R. Discussion Papers - 2015

The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using … risk and bank risk, with the former being overall more important in explaining bank risk, than vice versa. The paper … focuses specifically on the impact of non-standard monetary policy measures by the European Central Bank and on the effects of …

Persistent link: https://www.econbiz.de/10011145437

Modeling default correlation in a US retail loan portfolio

Bams, Dennis; Pisa, Magdalena; Wolff, Christian C - C.E.P.R. Discussion Papers - 2012

This paper generalizes the existing asymptotic single-factor model to address issues related to industry heterogeneity, default clustering and parameter uncertainty of capital requirement in US retail loan portfolios. We argue that the Basel II capital requirement overstates the riskiness of...

Persistent link: https://www.econbiz.de/10011083415

Sovereign credit ratings in the European Union: a model-based fiscal analysis

Polito, Vito; Wickens, Michael R. - C.E.P.R. Discussion Papers - 2013

We propose a model-based measure of sovereign credit ratings derived solely from the fiscal position of a country: a forecast of its future debt liabilities, and its potential to use tax policy to repay these. We use this measure to calculate credit ratings for fourteen European countries over...

Persistent link: https://www.econbiz.de/10011083470

Modelling the U.S. sovereign credit rating

Polito, Vito; Wickens, Michael R. - C.E.P.R. Discussion Papers - 2012

A methodology for generating sovereign credit ratings based on macroeconomic theory is proposed. This is applied to quarterly U.S. data from 1970 to 2011. Over this period the official credit rating of U.S. Treasury securities has been of the highest quality. In contrast, the model-based measure...

Persistent link: https://www.econbiz.de/10011084723