Using a novel panel data set for half a million customers of a large Mexican retail chain I study determinants of consumer credit default. I document that information about which products a customer buys provides substantial information about potential default losses on a given loan. Differences...

This paper provides evidence of ratings shopping in the corporate bond market. By estimating systematic differences in agencies' biases about any given firm's bonds, I show that new bonds are more likely to be rated by agencies that are positively biased towards the firm---a pattern that is...

The modern credit market is actively changing under the influence of digitalization processes. Some of the drivers of these changes are financial companies that carry out, among other things, online lending. Online lending is objectively focused on short-term small loans, both payday loans (PDL)...

This paper examines to what extent household leverage - as measured by the debt-to-income (DTI) ratio - predicts delinquency in Peru's consumer credit market. A model is estimated to assess the relation between delinquency and the DTI ratio. The initial and current DTI ratios are assessed as...

More than 25% of credit bonds in China received improved issuance ratings, among which 96.6% used credit enhancement. We find that credit enhancement can effectively lower credit spreads, which still holds after a battery of robustness tests. We employ the propensity score matching method, the...

This paper explains the risk and returns of US corporate bond indices using a set of economically-motivated factors. In particular, I find that options markets explain a great deal of credit returns. Two particular features of corporate bonds generate option exposure. The first is that, in...

This paper demonstrates how deep learning can be used to price and calibrate models of credit risk. Deep neural networks can learn structural and reduced-form models with high degrees of accuracy. For complex credit risk models, whose closed-form solutions are not available, deep learning offers...

In this financial engineering research, we study the behaviour of an option premium of a call/put option which is embedded in a typical fixed coupon bond with finite maturity. The contribution of the research is the conclusion about the dynamics of premium changes; represented by direction and...