-spread default affects the banking system. We find that the interaction of credit, asset prices, and loan losses explains a complete …We link banking and asset prices in a simple monetary macroeconomic model. Our main innovation is to consider how wide … deteriorate, an asset price decline causes default among leveraged firms, and banks suffer loan losses. Their size determines …

falling asset prices affect the banking system through wide-spread borrower default, while deriving explicit solutions and …This paper links banking with asset prices in a monetary macroeconomic model. The main innovation is to consider how …-linear, and involves feedback from the banking system in the form of credit contraction. When borrowers repay, the effect ‘passes …

's option value, even after compensating a lender for expected default losses. This non-neutrality of debt arises from an … risks, and lowers the investment threshold. Compensating the lender for expected default losses reduces project …

reorganization or liquidation if the value of the firm falls below a certain threshold. In the event of default, however, many …

matches default risk analysis in a simple framework. Our extension includes other distributions of probability to model the … lifetimes of French firms while studying the related empirical default probabilities. We use mainly, but not exclusively …

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form … model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default … swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo …

risk premia. Evidence in favor of LM is uncovered and the extent of Default Risk Contagion in these markets during the …

excursions. The classical Black-Scholes-Merton-Cox approach postulates that default may occur, either at or before maturity, when … the firm's value process falls below a critical threshold. In the excursion approach the duration of default, the time … structure of different specifications of the event that triggers default. …

valuing credit derivatives, this new approach allows to incorporate correlative market and credit risk, interdependent default … existing structural models and intensity based models, but also produces explicit formulas for the prices of credit default …