Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically …, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding … are positively related to credit risk, resulting in a positive correlation between cash and spreads. In contrast, spreads …

. These comovements generate large credit risk premia for investment grade firms, which helps address the "credit spread … defaults, including "credit contagion" and market timing of debt issuance. It also provides a novel procedure to estimate state …

This paper examines the use of credit derivatives by US bank holding companies from 1999 to 2003 with assets in excess … only 19 large banks out of 345 use credit derivatives. Though few banks use credit derivatives, the assets of these banks … buyers of credit protection and disclose using credit derivatives to hedge loans. Banks are more likely to be net protection …

assets, based almost entirely on a credit risk criterion. The paper provides both a theoretical and empirical framework for … credit risk. For example, our findings indicate that the RBC weights overpenalize home mortgages, which have an average … credit loss of 13 basis points, relative to commercial and consumer loans. The RBC rules also contain a significant bias …

How does the large market for credit score improvement products affect consumers and market efficiency? For consumers …, we use a randomized encouragement design on a standard credit builder loan (CBL) and find null average effects on scores … credit activity. CBLs induce delinquency on pre-existing loan obligations, suggesting that even a seemingly modest additional …