This paper proposes a methodology to analyse the risk and return of large loan portfolios in a joint setting. I propose a tractable model to obtain the distribution of loan returns from observed interest rates and default frequencies. I follow a sectoral approach that captures the heterogeneous...

This introduces the symposium on financial economics.

Tax saving´s valuation is crucial for discounted cash flow valuation and WACC estimation. There is an ongoing debate about the appropriate discount rate for tax savings under CAPM approach. On this paper we evaluate tax savings from a contingent claim approach in order to establish a framework...

Financial intermediaries often use stress testing to set risk exposure limits. Accordingly, we examine a model with an agent who faces stress testing constraints and another who does not. Three results are obtained. First, when there are K* binding constraints, the constrained agent's optimal...

In this paper we propose a discrete time model to measure the default spread for Bank loans. The model provides a closed-form solution for the short and medium term default spread, which we assume to be dependent on the default probabilities, the losses given default, the risk grades transition...

Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this Paper, they are derived from risk-value models that generalize the Markowitz-model. We use a behaviourally based risk measure with an endogenous or exogenous benchmark. If the...

We introduce a canonical representation of call options, and propose a solution to two open problems in option pricing theory. The first problem was posed by (Kassouf, 1969, pg. 694) seeking “theoretical substantiation” for his robust option pricing power law which eschewed assumptions about...

We study the problem arising from the lack of information on some debtors’ behavior in the databases used to develop credit scoring models, and the use of the behavioral information stored at a Credit Register as a potential solution to the problem. To this purpose, we use yearly information...

The main purpose of this paper is to study the problem created by the lack of information about the credit history of some debtors in the databases used to develop credit scoring models and the use of information about behavior compiled by a credit risk register as a potential solution to the...