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Corporate Yield Spreads : Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market
Longstaff, Francis A. - 2004
We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the...
Persistent link: https://www.econbiz.de/10012468275
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Global Business Cycles and Credit Risk
Pesaran, M. Hashem - 2005
The potential for portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. Using a global vector autoregressive...
Persistent link: https://www.econbiz.de/10012467187
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Credit Risk and Disaster Risk
Gourio, Francois - 2011
Corporate credit spreads are large, volatile, countercyclical, and significantly larger than expected losses, but existing macroeconomic models with financial frictions fail to reproduce these patterns, because they imply small and constant aggregate risk premia. Building on the idea that...
Persistent link: https://www.econbiz.de/10012461632
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Credit Spreads as Predictors of Real-Time Economic Activity : A Bayesian Model-Averaging Approach
Faust, Jon - 2011
Employing a large number of real and financial indicators, we use Bayesian Model Averaging (BMA) to forecast real-time measures of economic activity. Importantly, the predictor set includes option-adjusted credit spread indexes based on bond portfolios sorted by maturity and credit risk as...
Persistent link: https://www.econbiz.de/10012461932
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Banks and Derivatives
Gorton, Gary - 1995
interest-rate sensitivities of interest rate swap positions of U.S. commercial banks to empirically address the question of … whether swap contracts have increased or decreased systematic risk in the U.S. banking system. We find that the banking system … as a whole faces little net interest-rate risk from swap portfolios …
Persistent link: https://www.econbiz.de/10012473787
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Over-the-Counter Derivatives and Systemic Risk to the Global Financial System
Darby, Michael R. - 1994
Over the last decade dealing in derivative financial instruments (basically forwards, futures, options and combinations of these), particularly in the over-the-counter (OTC) derivatives market has become a central activity for major wholesale banks and financial institutions. Measured in terms...
Persistent link: https://www.econbiz.de/10012474119
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Judging Banks' Risk by the Profits They Report
Meiselman, Ben S.; Nagel, Stefan; Purnanandam, Amiyatosh - National Bureau of Economic Research - 2023
In competitive capital markets, risky debt claims that offer high yields in good times have high systematic risk exposure in bad times. We apply this idea to bank risk measurement. We find that banks with high accounting return on equity (ROE) prior to a crisis have higher systematic tail risk...
Persistent link: https://www.econbiz.de/10014337867
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Risk-On Risk-Off : A Multifaceted Approach to Measuring Global Investor Risk Aversion
Chari, Anusha; Stedman, Karlye Dilts; Lundblad, Christian - National Bureau of Economic Research - 2023
This paper defines risk-on risk-off (RORO), an elusive terminology in pervasive use, as the variation in global investor risk aversion. Our high-frequency RORO index captures time-varying investor risk appetite across multiple dimensions: advanced economy credit risk, equity market volatility,...
Persistent link: https://www.econbiz.de/10014437038
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Contingent Credit Under Stress
Acharya, Viral V.; Jager, Maximilian; Steffen, Sascha - National Bureau of Economic Research - 2023
Over the past two decades, banks have increasingly focused on offering contingent credit in the form of credit lines as a primary means of corporate borrowing. We review the existing body of research regarding the rationales for banks' provision of liquidity insurance in the form of credit...
Persistent link: https://www.econbiz.de/10014437040
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Dimensions of Credit Risk and Their Relationship to Economic Capital Requirements
Carey, Mark - 2000
Now in prospect is a major revision of international bank capital regulations that would embody recent advances in credit risk measurement and management. Previous regulations have been simpler in structure, with a primary goal of getting capital requirements right on average, and thus have...
Persistent link: https://www.econbiz.de/10012471142