This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the distribution of loans returns. I use this model to describe the investment opportunity set of lenders using mean-variance analysis with a Value at Risk constraint. I also obtain closed...

The author's study analyzes, loan valuation methods using discrete time model of contingent claims analysis. In the empirical test, the undiversifiable risk was measured by the correlation coefficient of one borrower with the average return of all borrowers. The results of the test supported the...

The paper examines whether bank diversification in multiple dimensions can protect bank lending from uncertainty shocks. We use a panel of Vietnamese commercial banks during 2007 - 2019 for empirical analysis and measure uncertainty in banking by the dispersion of bank-level shocks. Our results...

Lending specialization on certain industry sectors can have opposing effects on monitoring (including screening) abilities and on the sectoral concentration risk of a credit portfolio. In this paper, we examine in the first part if monitoring abilities of German cooperative banks and savings...

Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and...

Using a unique data set on German banks' sector specific loan exposures to the real economy and the corresponding write-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common risk factors, we separate the bank-specific...

We use a unique dataset with bank clients’ security holdings for all German banks to examine how macroeconomic shocks affect asset allocation preferences of households and non-financial firms. Our analysis focuses on two alternative mechanisms which can influence portfolio choice: wealth...

This study investigates the net effects of sectoral loan concentration on banks in Hong Kong. Research in this area remains inconclusive, due to the potential trade-off between concentration risks and specialisation gains. Our empirical results, based on a regulatory panel dataset of licensed...

Banks produce short-term debt for transactions and storing value. The value of bank money must not vary over time so agents can easily trade this debt at par. This requires that no agent finds it profitable to produce costly private information about the bank's loans. To produce safe liquidity...

I develop an algorithm to approximate the loss rate distribution for fixed income portfolios with obligor concentrations. The approximation requires no advanced mathematics or statistics, only the summation of large exposures and the evaluation of binomial probabilities. The approximation is...