We estimate the impact of the COVID-19 pandemic on credit risk changes on a large sample of Polish SME firms. The Altman Z"-Score model, which has proven to be a powerful and robust bankruptcy prediction model across many industries and countries, is used to assess over 1,000 SMEs from seven...

The current standardized approach for assessing credit risk under Basel III depends on ratings assigned by credit rating agencies (CRAs). However, this approach presents three problems. First, the definitions of ratings used by CRAs to assess the likelihood of default and recovery rates are not...

Based on an empirical analysis of European corporations, we investigate the impact of sovereign risk on the pricing of corporate credit risk. In our paper, we show that sovereign credit default swaps (CDS) are positively correlated with corresponding corporate CDS spreads and are a significant...

We develop a theoretical model quantifying how firm-level pandemic exposure and sentiment, as informational shocks, affect a firm’s credit spread and default risk. Consistent with model predictions, we find significantly positive impacts on single-name credit default swap (CDS) spreads from...

This study examines the impact of credit rating announcements from the three leading credit rating agencies (Moody's, S&P, Fitch)on the Credit Default Swap Spreads of corporates and their spillover effects within industries. We find, that both downgrades and upgrades have an impact on the CDS...

Rather than assuming a fixed recovery rate in estimation, we estimate recovery rates from CDS spreads, using three years of daily data on 152 corporates. We use a quadratic pricing model which ensures nonnegative default probabilities and recovery rates. The estimated cross-section of recovery...

Corporate bond defaults in different sectors often increase suddenly at roughly similar times, although some sectors see default rates jump earlier than others. This could reflect contagion among sectors-specifically, defaults in one sector leading to credit stresses in other sectors of the...

This paper proposes several frameworks to estimate the appropriate default correlations for structured products, each of which jointly considers the role of co-movements in modeled risk characteristics and un-modeled systematic risk, or 'frailty'. We contrast our estimates with credit rating...

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...

We discuss a simple, exactly solvable model of stochastic stock dynamics that incorporates regime switching between healthy and distressed regimes. Using this model, which is analytically tractable, we discuss a way of extracting expected returns for stocks from realized CDS spreads,...