This paper investigates the importance of having a sovereign credit rating for a country's financial development. After controlling for endogeneity and selection bias, we compare different aspects of the financial sector and the capital markets of recently rated countries with otherwise similar,...

How does sovereign risk affect investors' behavior? We answer this question using a novel database that combines sovereign default probabilities for 27 developed and emerging markets with monthly data on the portfolios of individual bond mutual funds. We first show that changes in yields do not...

Insurance companies can be exposed to climate-related physical risk through their operations and to transition risk through their $12 trillion of financial asset holdings. We assess the climate risk exposure of property and casualty (P&C) and life insurance companies in the U.S. We construct a...

In collateralized lending markets haircuts are used to protect the lender from the risk of loss. An important cross-sectional determinant of haircuts is the systematic risk profile of the collateral, which describes the rate at which the collateral value is expected to decline in adverse market...

The papers included in this issue are selected from the 7th International Conference of the Financial Engineering and Banking Society (FEBS) organized by Strathclyde Business School during 1-3 June 2017. With circa 200 academics, practitioners and regulators participating as delegates from...

After the 2008 financial crisis, policymakers focused on enacting improvements in two areas of financial regulation: capital and liquidity, affecting the composition of bank assets and the sources of bank funding. These improvements made both the emergence of a crisis less likely and the...

We dissect the information content of sovereign credit rating reports issued by Moody's in 62 countries for the period 2003–2013. Using the Naïve Bayesian machine learning algorithm, we classify all sentences in each report into positive and negative tone, as well as six informational...