Unlike traditional bonds, Floating-rate bonds (FRB) do not have a fixed rate coupon. Instead, their rate fluctuates or floats based on the market plus a spread. As a result, FRBs tend to be less vulnerable to interest-rate fluctuations. Many believe FRBs can help preserve principal, while...

This paper aims to develop a credit-risk model in which firms face rollover risk, and the markets for defaulted assets are segmented due to entry costs. The paper shows that reducing the entry costs in this economy may decrease the total surplus of the economy. This outcome can arise because...

This paper examines various concepts related to the topic of corporate risk appetite. It emphasises the need for consistency of definitions and coherence of terminology. Corporate risk appetite articulation is discussed as a corollary to strategy formulation and as an aid to corporate...

For markets to work efficiently, buyers and sellers must be able to transact easily. People must have access to a marketplace such as a supermarket or a stock exchange with adequate liquidity. Further, people must have confidence that such a well-functioning marketplace will also exist in the...

We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of financial institutions conditional on other institutions being in distress. We define an institution’s (marginal) contribution to systemic risk as the difference between CoVaR and the financial system’s VaR. From our...

We introduce two subclasses of convex measures of risk, referred to as entropy coherent and entropy convex measures of risk. We prove that convex, entropy convex and entropy coherent measures of risk emerge as certainty equivalents under variational, homothetic and multiple priors preferences,...

Securities loans collateralized by cash are by far the most popular form of securities-lending transaction. But when the cash collateral associated with these transactions is actively reinvested by a lender's agent, potential risks emerge. This study argues that the standard compensation scheme...

This article reviews the principal features of structured finance instruments. Key to understanding the risk properties of these products is the evaluation of the risks associated with their contractual structure, in addition to the modelling of the credit risk of the underlying asset pools. It...

I develop a framework of the build-up and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: normal times – periods of modest investment, and booms – periods of expansionary investment. Normal times occur when...