There has been a large and committed shift to converting corporate risk management programs into enterprise risk management (ERM) systems, but the ERM literature still lacks a clear and structured picture of the incentives/benefits of ERM. We provide a structured and substantiated way of...

Based on a screening model, we hypothesize that borrower risk will be over- (under-)priced in recessions (booms), and the loan spreads' sensitivity to default risk as a function of economic growth will be inverse U-shaped. We test this prediction using a sample of 5,300 U.S. commercial loans...

This paper is the first to compare the ability of the two structural credit risk models of Merton (1974) and Leland (1994a, b) to predict bankruptcy. We investigate different implementations of the Merton and Leland models on the whole CRSP/Compustat universe of firms from 1980 to 2015. Although...

A conjecture in the literature holds that a large and diversified investor base leads to lower volatility by improving the quality of the price signal. In this paper this hypothesis is examined using unique Swedish ownership data. The data does not support the conjecture. Instead, volatility...

A conjecture in the literature holds that a large and diversified investor base leads to lower volatility by improving the quality of the price signal. In this paper this hypothesis is examined using unique Swedish ownership data. The data does not support the conjecture. Instead, volatility...

This paper decomposes the popular risk measure Value-at-Risk (VaR) into one jump- and one continuous component. The continuous component corresponds to general market risk and the jump component is proportional to the event risk as defined in the Basel II accord. We find that event risk, which...

We derive exact expressions for the risk premia for general distributions in a Lucas economy and show that the errors when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates are Normal Inverse Gaussian (NIG) and fitting the...