BankCaR is a credit risk model that forecasts the distribution of a commercial bank's charge-offs. The distribution depends only on systematic factors; BankCaR takes each bank and projects its expected charge-off across a distribution of good years and bad years. Since most bank failures occur...

This paper examines the impact of mergers on default risk, finding that, on average, a merger increases the default risk of the acquiring firm. This is surprising for two reasons: risk reduction is among the reasons commonly cited for mergers, and asset diversification should reduce default risk...