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This paper maps the risk arising from the transition to a low-emission economy and studies its transmission channels within the financial system. The environmental dynamic stochastic general equilibrium (E-DSGE) model shows that tightening environmental regulations deteriorates firms' balance...
Persistent link: https://www.econbiz.de/10012024511
Persistent link: https://www.econbiz.de/10012896650
This paper studies a novel type of misallocation of credit between investments of varying liquidity. One type of investment is more liquid, i.e., its return is more pledgeable, and the other is more productive. Low liquidities of both investment types imply that the allocation of credit is...
Persistent link: https://www.econbiz.de/10012843309
This paper develops a new framework for the design of collateral requirements in a centrally cleared market. Clearing members post collateral - initial margins and default funds - to increase their pledgeable income, thereby credibly committing to risk management. We show that initial margins...
Persistent link: https://www.econbiz.de/10012850792
The COVID-19 pandemic represented the emergence of an enormous, systemic, and largely un-anticipated economic risk. It upended entire industries on a global scale, shuttered millions of businesses by government order, and left millions more struggling to adapt to unforeseen and rapidly changing...
Persistent link: https://www.econbiz.de/10014348643
We study the preferential treatment of green bonds in the Central Bank collateral framework as an environmental policy instrument. We propose a macroeconomic model with environmental and financial frictions, in which green and conventional entrepreneurs issue defaultable bonds to banks that use...
Persistent link: https://www.econbiz.de/10012548857
Banks’ mandatory switch from an incurred credit loss model (IL) to an expected credit losses model (EL) in certain jurisdictions can affect loan pricing and securitization in foreign markets. Comparing U.S. banks with IFRS subsidiaries to U.S. domestic banks, we find that the former charge...
Persistent link: https://www.econbiz.de/10014362459
This paper argues that tax liabilities explain a large fraction of observed short-maturity investment-grade (IG) spreads, but credit-event premia do not. First, we extend Duffie and Lando (2001) by permitting management to issue both debt and equity. Rather than defaulting, managers of IG firms...
Persistent link: https://www.econbiz.de/10012943956
Purpose – The purpose of this paper is to discuss important aspects concerned with credit risk measurement of SMEs.Methodology - Paper presents theoretical study, based on literature review and summary of findings of similar research papers, which have focused on credit risk assessment of...
Persistent link: https://www.econbiz.de/10013109592
We present a banking model with imperfect competition in which borrowers' access to credit is improved when banks are able to transfer credit risks. However, the market for credit risk transfer (CRT) works smoothly only if the quality of loans is public information. If the quality of loans is...
Persistent link: https://www.econbiz.de/10013155071