During the past forty years, the simultaneous, symbiotic growth of financial innovation, disintermediation and deregulation has created an environment with extremely complex, opaque investment instruments. That system has now collapsed. At the very center of the crisis are a small group of...

This paper investigates whether and how the initiation of Credit Default Swaps (CDS) trading affects analyst optimism. First, we document that analyst forecasts become less optimistic after the initiation of CDS trading. Second, we find that the dampening effect of CDS on analyst optimism is...

This study investigates the role of tax avoidance in the credit rating process and whether differences exist in how rating agencies account for the risk relevance of tax avoidance. Using a sample of initial credit ratings assigned to public debt issuances during the 1994-2013 period, our...

This study examines whether the quality of borrowers' accounting information affects the accuracy and timeliness of credit ratings issued by rating agencies. I consider two possible effects. The news effect posits that higher quality accounting provides better information to credit rating...

We evaluate the viability of credit default swaps (CDS) spreads as substitutes for credit ratings. We focus on CDS spreads based on the obligations of financial institutions, particularly fifteen large financial institutions that were prominently involved in the recent financial crisis. Our...

We present a data-driven proof of concept model capable of reproducing expected counterparty credit exposures from market and trade data. The model has its greatest advantages in quick single-contract exposure evaluations that could be used in front office xVA solutions. The data was generated...

This paper examines the direct relevance of accounting information for credit default swap (CDS) pricing. Prior research on the impact of accounting information for CDS pricing has neglected to include either the output of theoretical CDS pricing models or credit ratings, both of which should...

We investigate an unexplored channel—loss given default—through which accounting information can shape the design of debt contracts. Using a sample of defaulted bonds, we find that borrower accounting information available at contract initiation possesses significant power for predicting...

This study investigates the effect of production efficiency uncertainty (PEU) on firm credit risk from structural form credit model perspectives (e.g. asset volatility) by employing 4376 American manufacturing firms' bond observations from the year 1997 to 2008. We find that PEU is positively...

We investigate the problem of modeling defaults of dependent credits. In the framework of the class of structural default models we study threshold models where for each credit the underling ability-to-pay process is a transformation of a Wiener processes. We propose a model for dependent...