The main goal of this paper is to better understand the behavior of credit spreads in the past and the potential risk of unexpected future credit spread changes. One important consideration to note regarding credit spreads is the fact that bond spreads contain a liquidity premium, which...

The exchange of regulatory initial margin for uncleared derivatives (BCBS 261 due on the 1st of September 2016) implies a massive consumption of collateral. This paper proposes a new model to account for collateral and its quality for both fair valuation and CCR capital frameworks defined under...

Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk — a major obstacle to the sustainability of lenders outreaching to the poor. Specifically,...

A flexible way to incorporate heterogeneous tail-dependency into dependency modeling based on a recently proposed modification of the t-copula is presented and applied to a realistic credit portfolio. The heterogeneous t-copula is assumed for the underlying multivariate factor model and it is...

Background: This study analyzes the impact of non-performing loans (NPLs) on bank liquidity creation to investigate the existence of moral hazard problem in Chinese banks. Methods: It uses data from 197 listed and unlisted Chinese banks, spanning the period 2005 to 2014. Generalized method of...