We model 19812002 annual default frequencies for a panel of US firms in different rating and age classes from the Standard and Poor's database. The data is decomposed into a systematic and firm-specific risk component, where the systematic component reflects the general economic conditions and...

We introduce a structural dynamic network model of the formation of lending relationships in the unsecured interbank market. Banks are subject to random liquidity shocks and can form links with potential trading partners to bilaterally Nash bargain about loan conditions. To reduce credit risk...

Many empirical studies show that factor models have a relatively high forecast compared to alternative short-term forecasting models. These empirical findings have been established for different data sets and for different forecast horizons. However, choosing the appropriate factor model...