with access to highly granular risk information on loan volumes and banks’ internal estimates of default probabilities … probabilities of default has a significant impact on the outcome of the stress test. -- Asset correlation ; portfolio credit risk …

. In particular, we can numerically support the usual simplification in the absence of default risk. In case that firms are … default-risky, however, empirical findings indicate a clear difference between these costs equal to 1.88 percentage points on … company cost of capital does practically not depend on the debt ratio if the firm is not subject to default risk or if …

default rate and loss given default of bank loans share a cyclical component, related to the business cycle. We infer this … cycle by a new model that distinguishes loans with large and small losses, and links them to the default rate and macro …

We show that systemic risk in the banking sector breeds macroeconomic uncertainty. We develop a model of a production … economy with a banking sector where financial constraints of banks can lead to disastrous banking panics. We find that a … higher probability of a banking panic increases uncertainty in the aggregate economy. We explore the implications of this …