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 … simultaneously. We find that all three types of risk factors (macro, frailty, industry/contagion) are important for default risk. The …

conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk … sample selection bias, we show that CoCo bonds issuance has a strong positive e↵ect on risk-taking behaviour, particularly … amplifies the impact of CoCo bonds on risk-taking. …

I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk …: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces … undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social …

find that risk-shifting interacts with regulatory arbitrage motives to explain how banks adjust their portfolios after … yielding but zero risk-weight sovereign bonds. The increase in banking system risk might therefore be even larger than the … decline in risk-weighted solvency ratios suggests. Distress in the banking system also feeds back onto bond prices. Bonds …

important for credit risk management as well as for regulation and systemic risk management. In this paper, we use 1927-1997 U …

Dynamic models for credit rating transitions are important ingredients for dynamic credit risk analyses. We compare the … properties of two such models that have recently been put forward. The models mainly differ in their treatment of systematic risk … switching models are employed for dynamic credit risk management. As a side result of our analysis, we obtain indirect evidence …

This paper investigates the dynamic properties of systematic default risk conditions for firms from different countries … other factors are of high importance as well. For all firms, deviations of systematic default risk from macro fundamentals … are correlated with net tightening bank lending standards, implying that bank credit supply and systematic default risk …

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 risk components for a large data setcomprising the U.S., the EU-27 area … risk conditions can significantly and persistently de-couplefrom macro-financial fundamentals. Such decoupling can serve as …