Showing 1 - 10 of 2,019
Credit card portfolios represent a significant component of the balance sheets of the largest US banks. The charge‐off rate in this asset class increased drastically during the Great Recession. The recent economic downturn offers a unique opportunity to analyze the performance of credit risk...
Persistent link: https://www.econbiz.de/10013006575
The Great Recession offers a unique opportunity to analyze the performance of credit risk models under conditions of economic stress. We focus on the performance of models of credit risk applied to risk-segmented credit card portfolios. Specifically, we focus on models of default and loss and...
Persistent link: https://www.econbiz.de/10013028644
New regulations promote the role of Central Counter-Parties (CCPs) as insurers of counterparty risk to stabilize derivative markets. Whereas the US favors monopolistic CCPs, the EU promotes the coexistence of several CCPs for a given asset class. In this paper, we shed light on the competition...
Persistent link: https://www.econbiz.de/10013218785
We propose a unified structural credit risk model incorporating insolvency, recovery and rollover risks. The firm finances itself mainly by issuing short- and long-term debt. Short-term debt can have either a discrete or a more realistic staggered tenor structure. We show that a unique threshold...
Persistent link: https://www.econbiz.de/10013100650
In this paper, we describe a bankruptcy game played in a pure-exchange, perfectly competitive economy, and establish the existence of competitive equilibria. The game admits of lying by borrowers and costly auditing by lenders. The equilibria are characterized by (endogenously determined)...
Persistent link: https://www.econbiz.de/10013157146
By treating derivatives and financial repurchase agreements much more favorably than it treats other financial vehicles, American bankruptcy law subsidizes these arrangements relative to other financing channels. By subsidizing them, the rules weaken market discipline during ordinary financial...
Persistent link: https://www.econbiz.de/10013091160
This paper studies the dynamic risk management of highly-levered financial institutions within a structural model of credit risk. We consider a context in which systemic default induces externalities that amplify the private cost of financial distress. This represents a source of strategic...
Persistent link: https://www.econbiz.de/10013066407
Systemic risk - the possibility that an individual firm's failure will result in broad damages to the economy as a whole - is the epitome of financial crisis. Bailouts of troubled firms have long been the standard response to systemic risk. Yet, bailouts suffer from problems of political...
Persistent link: https://www.econbiz.de/10013070313
Using a continuous time, structural model of a dealer-bank, we derive fair value equations for credit risky financial products that can not be perfectly hedged, fully taking into account the impact the contracts have on the dealer-bank's earnings volatility and, consequently, their solvency and...
Persistent link: https://www.econbiz.de/10014236041
We describe a new framework for collateralized exposure modelling under an ISDA Master Agreement with a Credit Support Annex. The proposed model captures legal and operational aspects of default in considerably greater detail than models currently used by most practitioners, while remaining...
Persistent link: https://www.econbiz.de/10013000779