The financial crisis of 2007-09 revealed the importance of counterparty credit risk in the valuation of non-collateralized interest rate swaps. In theory, these valuations rest on assumed default probabilities and recovery rates. These assumptions, however, should be reflected in the...

This paper aims at testing the effect of AIG's loss announcements and Federal Reserve's subsequent innovation on the financial industry. An analysis of seemingly unrelated regression on the returns of four industries- banking, insurance, brokerage firms and savings and loan Institutions (S&Ls)...

Katharina Pistor proposed the Legal Theory of Finance (LTF), based on the premise that finance is legally constructed (Pistor, 2013b). In this paper, we apply network science to provide empirical evidence from global financial networks (GFN) to support the argument of the LFT. Using data from...

Whether financial analysts play an effective role as information intermediaries and monitors has triggered a wide spread of debate among academics and practitioners to date. We complement this debate by investigating the association between analyst coverage and firm-specific future stock price...

Credit default swaps ("CDSs") were widely blamed as a primary cause of the recent financial crisis; CDSs fomented panic as the price of credit protection spiked and contributed to the Federal Reserve's decision to bail out American International Group. To reduce the likelihood that credit...

The announcement by the Reserve Primary Fund, in September 2008, that it was “breaking the buck,” triggered a widespread withdrawal of assets from other money market funds and led the U.S. Government to adopt emergency measures to maintain the stability of the short term credit markets. In...

This paper proposes and evaluates several market-based measures for US and eurozone individual bank tail risk and banking system risk. We apply statistical extreme value analysis to the tails of bank equity prices to estimate the likelihood of individual institutions financial distress as well...

This paper focuses on market discipline as a necessary condition to preserve the signaling content of balance sheet indicators and market prices as macroprudential tools. It argues that market discipline enhances the information content of market prices by reflecting the expected private cost of...

Purpose: The value of relationship building is well documented in the literature, where a number of benefits seem to accrue for both interacting parties. This is also the case for Bank-SME relationships. However, the recent financial crisis is expected to have a significant impact on the...

The hedge funds industry has evolved tremendously in recent years. According to the CASAM CISDM Industry Report, assets under management in hedge funds had grown from less than USD 50 billion at the end of 1990 to over USD 2.1 trillion at the end of 2007. However, assets managed by hedge funds...