In a default corridor [0,B] that the stock price can never enter, a deep out-of-the-money American put replicates a pure credit contract (Carr and Wu, 2011). Assuming discrete (one-period-ahead predictable) cash flows, we show an endogenous credit-risk model generates, along with the default...

This paper examines the determinants of European bank risk-taking during major financial crisis. Using a sample of banks from 26 countries over the period 2005–2015, we examine the nature of the relationship between bank risk, bank characteristics, regulatory, institutional and macroeconomic...