Within bank activities, which is normally defined as the joint exercise of savings collection and credit supply, risk-taking is natural, as in many human activities. Among risks related to credit intermediation, credit risk assumes particular importance. It is most simply defined as the...

Roll rates and net flow rates can be seen as the evolution of ageing of accounts receivable and Markov chains. They are accepted methodologies to model the behavior of non-performing consumer loans by buckets and to predict losses, but we find that quite often they are wrongly used as...

In this paper we propose a framework for measuring and stress testing the systemic risk of a group of major financial institutions. The systemic risk is measured by the price of insurance against financial distress, which is based on ex ante measures of default probabilities of individual banks...

Recent studies find a positive correlation between default and loss given default rates of credit portfolios. In response, financial regulators require financial institutions to base their capital on 'Downturn' loss rates given default which are also known as Downturn LGDs. This article proposes...

Accounting standards require from financial institutions to consider and forecast multiple macroe- conomic scenarios when calculating loan loss provisions. Loan loss provisions protect a financial institutions against losses. But how to determine objectively the number of scenarios and to...

We determine the magnitude and nature of systematic default risk using 1971{2009) default data from Moody's. We disentangle systematic risk factors due to business cycle effects, common default dynamics (frailty), and industry-specific dynamics (including contagion). To quantify the contribution...