A framework to run system-wide, balance sheet data-based liquidity stress tests is presented. The liquidity framework includes three elements: (a) a module to simulate the impact of bank run scenarios; (b) a module to assess risks arising from maturity transformation and rollover risks,...

This paper analyzes the price stabilizing properties of puttable and extendible bonds, their potential to help develop interest-rate derivative markets, and their use by governments. Their stabilizing properties imply that, when bond prices fall, prices for puttable and extendible bonds fall by...

Currency mismatches in corporate balance sheets have been singled out as an important factor underlying the severity of recent financial crises. We propose several structural models for measuring default risk for firms with currency mismatches in their asset/liability structure. The proposed...

As is well known, most models of credit risk have failed to measure the credit risks in the context of the global financial crisis. In this context, financial industry representatives, regulators and academics worldwide have given new impetus to efforts to improve credit risk modeling for...

We use the regime-switching econometric models in Hamilton (1989) and Filardo (1994) to study business cycles in Mexico. In particular, we characterize the ups and downs of economic activity in Mexico. As a proxy for economic activity, we use the Mexican quarterly industrial production index...

This study assesses the overall impact on credit of the financial regulatory reforms in Europe, Japan, and the United States. Long-term cost estimates are provided for Basel III capital and liquidity requirements, derivatives reforms, and higher taxes and fees. Overall, average lending rates in...

The paper proposes a simple, new, analytical framework for assessing the cost and benefits of macroprudential policies. It proposes a measure of net benefits in terms of parameters that can be estimated: the probability of crisis, the loss in output given crisis, policy effectiveness in bringing...

This paper introduces the Asset and Liability Management (ALM) compound option model. The model builds on the observation that the public sector net worth in a multi-period setting corresponds to the value of an option on an option on total government assets. Hence, the ALM compound option model...

As is well known, most models of credit risk have failed to measure the credit risks in the context of the global financial crisis. In this context, financial industry representatives, regulators and academics worldwide have given new impetus to efforts to improve credit risk modeling for...

Intro -- Contents -- I. INTRODUCTION -- II. WHY DO CURRENCY MISMATCHES MATTER? -- III. THE STRUCTURAL APPROACH TO DEFAULT RISK -- IV. THE DIFUSSION MODEL -- V. THE JUMP-DIFFUSION MODEL -- VI. THE DOUBLE EXPONENTIAL JUMP-DIFFUSION MODEL -- VII. SURVEILLANCE APPLICATIONS -- VIII. CONCLUSIONS --...