This paper presents background work that has been the basis for the development of the market and credit risk indicators (MRI and CRI, respectively) as published in the IMF's Global Financial Stability Report (GFSR) since September 2004. The fundamental idea was to build a set of Financial...

This paper examines the role of accounting, market and macroeconomic information in explaining the cross-sectional variation of credit default swap spreads. The study proposes a panel FAVAR methodological approach to combine the additional predictions from a long list of accounting, market and...

This paper proposes a framework for the surveillance of financial institutions' derivatives activities. The designed framework builds on information likely to be collected by financial market regulators for supervisory purposes, and/or information collected by market participants for the purpose...

Currency total return swaps (CTRS) are hybrid derivatives instruments that allow to simultaneously hedge against credit and currency risks. We develop a structural credit risk model to evaluate CTRS premia. Empirical test on a sample of 23,005 price observations from 59 underlying issuers yields...

The Australian credit default swap (CDS) market has been increasingly used by financial institutions to trade and manage credit risk. As a result, there has been greater use of the market as a source of credit risk pricing information. Similarities between CDS and bonds allow pricing in the two...

The increasing ability to trade credit risk in financial markets has facilitated its dispersion across the financial and other sectors. However, specific risks attached to credit risk transfer (CRT) instruments in a market with still-limited liquidity means that its rapid expansion may actually...

Motivated by the interplay between structural and reduced form credit models, we propose to model the firm value process as a time-changed Brownian motion that may include jumps and stochastic volatility effects, and to study the first passage problem for such processes. We are lead to consider...

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic...

Credit ratings have contributed to the current financial crisis. Proposals to regulate credit rating agencies focus on micro-prudential issues and aim at reducing conflicts of interest and increasing transparency and competition. In contrast, this paper argues that macro-prudential regulation is...

The industrial organization approach to the microeconomics of banking augmented by uncertainty and risk aversion is used to examine credit derivatives and macro derivatives as instruments to hedge credit risk for a large commercial bank. In a partial-analytic framework we distinguish between the...