This paper provides evidence for regulatory arbitrage within the class of asset-backed securities (ABS) based on individual asset holding data of German banks. I find that banks operating with tight regulatory constraints exploit the low risk-sensitivity of rating-contingent capital requirements...

This paper provides evidence for regulatory arbitrage within the class of assetbacked securities (ABS) based on individual asset holding data of German banks. I find that those banks operating with tight regulatory constraints pick the securities with the highest yield and lowest collateral...

Loss Given Default (LGD) is a major element for pricing credits and bonds. As there has been a substantial amount of research during the last years, this paper aims to give an overview. Initially, defaults and recovery definitions for credits and the differences to bonds are discussed. A survey...

Market-implied ratings gained importance as efficient early warnings of official credit rating migrations. We build a two-dimensional implied rating system that gathers information from both the bond and the CDS markets. The system is able to outdo each of the corresponding one-dimensional...

Credit Rating Agencies (CRAs) adjust preliminary bond ratings with knowledge beyond publicly available information. These unobserved "soft adjustments" may reflect material non-public information and rating biases due to conflicts of interest, making certain bond characteristics endogenous. We...

The dependency of the individual default behavior of a firm on the state of the credit cycle is widely implemented in credit portfolio models and ultimately reflected in the Basel II one-factor model determining capital requirements. Despite this, macroeconomic variables able to represent this...

While a rapidly growing body of research underscores the influence of social capital on financial decisions and economic developments, objective data-based measurements of social capital are lacking. We introduce average credit scores as an indicator of a community's social capital and present...

College students now use various forms of unsecured credit such as private student loans and credit cards to finance college. Access to these credit lines and the interest rates charged on these loans can vary significantly across credit scores. In this paper, we analyze if credit status, as...