This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the … with a Value at Risk constraint. I also obtain closed form expressions for the interest rates that banks should set in … compensation for borrowers' credit risk under absence of arbitrage opportunities and I use these rates as a benchmark to interpret …

The calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is … CDSs and CDS indices, and we also evaluate the level of basis risk still remaining under the hedge. We address several … questions: Is there enough diversification of risk in a global credit portfolio to allow for a good hedge? Is basis risk higher …

We discuss how to build ETF risk models. Our approach anchors on i) first building a multilevel (non …-)binary classification/taxonomy for ETFs, which is utilized in order to define the risk factors, and ii) then building the risk models based … on these risk factors by utilizing the heterotic risk model construction of https://ssrn.com/abstract=2600798 (for binary …

out some key issues on how the credit risk associated to these products can be reduced and, finally, in the last section …

, simultaneously, reduced risk measures in credit securities. Here, we present an intuitive theory for this anomaly based on the …

and public bailouts.The evidence of a substantial underestimation of the risk related to a general credit spread widening … leads to investigate the reason why risk management systems, in the early stage of the financial crisis, were not able to … financial instruments, a treatment of expected losses that is aligned with the most common methodologies for credit risk …

firms and concludes that both the size and book-to-market effects are related to default risk. For example, small firms earn … higher return than big firms only if they have higher default risk and value stocks earn higher returns than growth stocks if … their default risk is high. In this paper we use a more advanced compound option pricing model for the computation of …

Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a … pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity …

While empirical literature has documented a negative relation between default risk and stock returns, theory suggests … that default risk should be positively priced. In this paper, we calculate monthly probabilities of default (PDs) for a …. In accordance with theory, we find that the systematic part, measured as the PD sensitivity to aggregate default risk, is …

While empirical literature has documented a negative relation between default risk and stock returns, the theory … suggests that default risk should be positively priced. We provide an explanation for this "default anomaly", by calculating … components. The systematic part, measured as the PD sensitivity to aggregate default risk, is positively related to stock returns …