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We discuss a simple, exactly solvable model of stochastic stock dynamics that incorporates regime switching between healthy and distressed regimes. Using this model, which is analytically tractable, we discuss a way of extracting expected returns for stocks from realized CDS spreads,...
Persistent link: https://www.econbiz.de/10012863946
Persistent link: https://www.econbiz.de/10013127442
This thesis lies at the intersection of mathematics, finance and numerical methods. The financial question of how to model credit risk, specifically corporate bond defaults, and how to model correlations between defaults, motivates our study of the mathematics behind a specific kind of credit...
Persistent link: https://www.econbiz.de/10012846216
In this paper, we compare different methods for computing default probabilities using a sample of banks that experienced financial distress during the 2007–2009 global financial crisis. The traditional KMV-Merton model for firm valuation, credit ratings by rating agencies and a recently...
Persistent link: https://www.econbiz.de/10013097198
Using discounted cash flow valuation together with a Merton-style credit risk model this paper quantifies the effects of credit risk on timed equity buybacks and issuances. Assumed managers act in best interest of their long-term shareholders and do have superior information, the potential value...
Persistent link: https://www.econbiz.de/10014257572
This study measures the effects of specific credit risk factors of companies that defaulted during the Asian currency and global credit crises. Using Taiwanese listed companies' data, the predictability of specific credit risk factors were discrepancies during these 2 crises. First, I captured...
Persistent link: https://www.econbiz.de/10012963668
Bank credit constraints can reduce firms' ability to borrow to fund hedging and counterparties' capacity to provide hedging services, thus affecting post-hedging outcomes. We find that a one-standard-deviation tighter credit standards increases (post-hedging) exchange rate exposure by 10%. This...
Persistent link: https://www.econbiz.de/10013008149
By decoupling economic growth from the exploitation of virgin raw materials and environmental degradation, as well as by developing practices more resilient to the economic cycle, Circular Economy (CE) offers effective hedging of linear risks and shields from that of stranded values. We tested...
Persistent link: https://www.econbiz.de/10013312098
The finance literature on carbon risk focuses mostly on the extent to which this risk is currently priced in financial markets. This paper sheds light on a complementary question, i.e. what could be the level of potential carbon risk implied by different future climate policy scenarios. To this...
Persistent link: https://www.econbiz.de/10014260114
This paper discusses the concept of leverage, its components and how to measure and monitor it. It proposes an innovative approach to assessing leverage based on flows using the concept of a marginal leverage ratio, which reveals the leverage related to new activities, as a valuable supplement...
Persistent link: https://www.econbiz.de/10013022881