Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between Merton-type and Black-Cox-type structural default models. Our...

This paper studies how fiscal policy in the eurozone and the United States (US) affected banks’ loan loss provisioning during the COVID-19 crisis. By decomposing government support into below-the-line (loan guarantees) and above-the-line (cash transfers) support, we examine how both types of...

This paper develops a new approach for conceptualizing and measuring the risk associated with bank failure. The price of this risk in risk-adjusted present-value terms is estimated at $170-340 million per annum (0.07-0.15% of GDP), representing the price of the financial risk that exists ex-ante...

Credit risk assessment is a crucial part of macroprudential analysis, with the aggregate nonperforming loan (NPL) ratio serving as a proxy for the economy-wide probability of default of the banking sector's overall loan exposure. Therefore, the factors driving the NPL ratio deserve a lot of...

We find that a firm's stock price reaction to its credit rating downgrade announcement is muted by 44--52% when credit default swaps (CDSs) trade on its debt. We explore the role of the CDS markets in providing information ex ante and relieving financing frictions ex post for downgraded firms....

Even as banks have decreased their exposure to residential mortgage loans since 2008, bank exposure to leveraged lending has risen dramatically. The $1 trillion total asset leveraged loan market poses a significant and growing source of credit risk to U.S. depository institutions and investors....

In the recent theoretical literature on lending risk, the coordination problem in multi-creditor relationships have been analyzed extensively. We address this topic empirically, relying on a unique panel data set that includes detailed credit-file information on distressed lending relationships...

SUERF – The European Money and Finance Forum, the Deutsche Bundesbank and the Institute for Monetary and Financial Stability (IMFS) took the opportunity of the first anniversary of this new institution to organise a joint conference in Berlin on 8-9 November 2011. The purpose of this event was...

We analyze the determinants of real estate and credit bubbles using a unique borrower-lender matched dataset on mortgage loans in Spain. The dataset contain real estate credit and price conditions (loan principal and spread, and the appraisal and market price) at the mortgage level, matched with...