This paper illustrates channels by which regulations that require banks to hold liquid assets can either increase or decrease a bank's incentive to take risk with its remaining ineligible assets. A greater capacity to respond to liquidity stress increases the potential profits a bank would put...

This study investigates whether banks and insurance corporations perform regulatory arbitrage by buying bonds with inflated credit ratings. We argue that credit rating based capital requirements incentivize banks and insurance corporations to hold more bonds with inflated credit ratings. We...

In this paper we review the pricing and model calibration of Credit Default Swaps referring to both the International Swaps and Derivatives Association (ISDA) CDS contract and credit model standardization guidelines. Furthermore we provide an Excel pricing workbook to supplement the materials...

This paper examines the relationship between banks' observed credit default swap (CDS) spreads and possible measures of systemic importance. We use five-year CDS spreads from Markit with an international sample of 71 banks to investigate whether market participants are giving them a discount on...

When banks are confronted with systemic crises, some banks reduce the credit risk in their loan portfolios, whereas others exploit potential government bailouts and increase their internal credit risk in their loan portfolios. Using a connectedness sample method identifying managerial styles...

A national loan level data set, aggregated at the zip code is used to examine the elasticity of default relative to local demographic characteristics and state level legislation regulating foreclosure procedures and predatory lending. We also illustrate the merit of using a form of hierarchical...

This article explores the question of whether bond insurers are able to sufficiently evaluate the credit risk of insured bonds, the answer to which would determine the future of municipal bond insurance. A sample of insured municipal bonds is investigated to determine whether bond insurance...

With banking sectors worldwide still suffering from the effects of the financial crisis, public discussion of plans to place toxic assets in one or more bad banks has gained steam in recent weeks. The following paper presents a plan how governments can efficiently relieve ailing banks from toxic...

Firm political contributions are associated with lower credit default swap spreads for contributing firms. To address endogeneity, we employ novel instruments and use a set of exogenous events on campaign contribution restrictions: (a) the passage of the Bipartisan Campaign Reform Act (BCRA)...

With banking sectors worldwide still suffering from the effects of the financial crisis, public discussion of plans to place toxic assets in one or more bad banks has gained steam in recent weeks. The following paper presents a plan how governments can efficiently relieve ailing banks from toxic...