This paper contributes to the economics of financial institutions risk management by exploring how loan securitization … affects their default risk, their systematic risk, and their stock prices. In a typical CDO transaction a bank retains through … systematic risk. For a sample of European CDO issues, we find an increase of the banks' betas, but no significant stock price …

This paper derives indicators of the severity and structure of banking system risk from asymptotic interdependencies …' exposure to each other ("contagion risk") and to systematic risk. Moreover, by applying structural break tests to those … measures we study whether capital markets indicate changes in the importance of systemic risk over time. Using data for the …

In this paper we argue that risk-adjustment matters for the valuation of financial distress costs, since financial … distress is more likely to happen in bad times. Systematic distress risk implies that the risk-adjusted probability of … a discount rate that is lower than the risk free rate. We derive a formula for the valuation of distress costs, and …

Discussions of financial risk often fail to distinguish between risks that are consciously borne and those that are not …. To understand the breeding conditions for financial crises the prime focus of concern should not be simply on large risk … balance sheet of the public sector. The paper also discusses how risk exposures can be measured, hedged and transferred …

monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank …

Management risk occurs when uncertainty about future managerial decisions increases a firm's overall risk. This paper … argues that management risk is an important yet unexplored determinant of a firm's default risk and the pricing of its debt …. CDS spreads, loan spreads and bond yield spreads all increase at the time of CEO turnover, when management risk is highest …

. In addition to providing accurate measures of loss probabilities and credit risk, our models can also be used to analyze … and compare risk management practices and the drivers of delinquency across the banks. We find substantial heterogeneity … in risk factors, sensitivities, and predictability of delinquency across banks, implying that no single model applies to …

change and the economy; and (iii) further explore "compound risk" scenarios in which climate risks co-occur with other risks … risk pricing in financial markets; and (iv) better understand and incorporate the process of expectations formation around …

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the …

: (1) financial crisis is unlikely to happen in the near future, and (2) the ultimate risk lies with China's economic …