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Recovery rates, default probabilities and the credit cycle

Bruche, Max; Gonzalez-Aguado, Carlos - London School of Economics (LSE) - 2006

a model in which this dependence is the result of an unobserved credit cycle: When times are bad, the default … ignoring the dynamic nature of credit risk could lead to a severe underestimation of credit risk (e.g. by a factor of up to 1 ….7 in terms of the 95% VaR). Also, the model indicates that the credit cycle is related to but distinct from the business …

Persistent link: https://www.econbiz.de/10010746498

How to lose money in derivatives: examples from hedge funds and bank trading departments

Ziemba, Bill; Lleo, Sebastien - London School of Economics (LSE) - 2014

What makes futures hedge funds fail? The common ingredient is over betting and not being diversified in some bad scenarios that can lead to disaster. Once troubles arise, it is difficult to take the necessary actions that eliminate the problem. Moreover, many hedge fund operators tend not to...

Persistent link: https://www.econbiz.de/10011201256

Systems and systemic risk in finance and economics

Zigrand, Jean-Pierre - London School of Economics (LSE) - 2014

This paper examines the concept of systemic risk and provides an intuitive account of the economic thought on systems and the development of the notion of systemic risk. It is illustrated by putting the ideas of system, systemic risk and endogenous risk in a historial perspective.

Persistent link: https://www.econbiz.de/10011201257

Protection for Whom? Creditor Conflicts in Bankruptcy.

Longhofer, S.D.; Peters, S.R. - London School of Economics (LSE) - 1999

In this article we provide a rationale for bankruptcy law that is based on the conflicts among creditors that occur when a debtor's iabilities exceed its assets. In the absence of a bankruptcy law, the private debt-collection remedies that creditors pursue when a debtor is insolvent result in an...

Persistent link: https://www.econbiz.de/10005776293

Does the underground economy hold back financial deepening? Evidence from the Italian credit market

Gobbi, Giorgio; Zizza, Roberta - London School of Economics (LSE) - 2007

regional credit markets we find a strong negative impact of the share of irregular employment on outstanding credit to the … outstanding credit to households, both expressed as ratios to GDP. Conversely, the feedback effects from financial deepening to … labour on banks’ entry decisions in the local credit markets, now defined in terms of provinces. …

Persistent link: https://www.econbiz.de/10010744823

Capital structure, investment, and fire sales

Gale, Douglas; Gottardi, Piero - London School of Economics (LSE) - 2014

We study a dynamic general equilibrium model in which firms choose their investment level and their capital structure, trading off the tax advantages of debt against the risk of costly default. The costs of bankruptcy are endogenously determined, as bankrupt firms are forced to liquidate their...

Persistent link: https://www.econbiz.de/10011170093

How to sell a (bankrupt) company?

Cornelli, Francesca; Felli, Leonardo - London School of Economics (LSE) - 2010

The restructuring of a bankrupt company often entails the sale of such company. This paper suggests a way to sell the company that maximizes the creditors’ proceeds. The key to this proposal is the option left to the creditors to retain a fraction of the shares of the company. Indeed, by...

Persistent link: https://www.econbiz.de/10011071365

Tweets, Google Trends and Sovereign Spreads in the GIIPS

Dergiades, Theologos; Milas, Costas; Panagiotidis, Theodore - London School of Economics (LSE) - 2013

We examine whether the information contained in social media (Twitter & Facebook) and web search queries (Google) influences financial markets. Using a multivariate system and focussing on Eurozone’s peripheral countries, the GIIPS (Greece, Ireland, Italy, Portugal and Spain), we show that...

Persistent link: https://www.econbiz.de/10010735151

Are there any Animal Spirits behind the Scenes of the Euro area Sovereign Debt Crisis?

Mamatzakis, Emmanuel - London School of Economics (LSE) - 2013

a loss function with reference to the ‘basis’, the difference between the spread over swap and Credit Default Swap (CDS …

Persistent link: https://www.econbiz.de/10010686658

Regional influences on U.S. monetary policy: some implications for Europe

Meade, Ellen E.; Sheets, D. Nathan - London School of Economics (LSE) - 2002

This paper looks at the monetary policy decisions of the U.S. Federal Reserve and asks whether those decisions have been influenced solely by national concerns, or whether regional factors have played a role. All of the Federal Reserve''s policymakers have some regional identity, i.e., either...

Persistent link: https://www.econbiz.de/10010884746