We determine the magnitude and nature of systematic default risk using 1971{2009) default data from Moody's. We disentangle systematic risk factors due to business cycle effects, common default dynamics (frailty), and industry-specific dynamics (including contagion). To quantify the contribution...

A macro-prudential policy maker can manage risks to financial stability only if currentand future risks can be reliably assessed. We propose a novel framework to assessfinancial system risk. Using a dynamic factor framework based on state-space methods, we model latent macro-financial and credit...

This paper investigates the dynamic properties of systematic default risk conditions for firms from different countries, industries, and rating groups. We use a high-dimensional nonlinear non-Gaussian state space model to estimate common components in corporate defaults in a 41 country sample...