This paper provides the first empirical investigation of the influence of credit default swaps (CDS) on the surge in subprime mortgage defaults, which is widely believed to be a driving force in the 2008/2009 financial crisis. In the years just before the 2008/2009 financial crisis, private...

Credit Risk Management has always been the key concern in financing with the commercial banks. Asset quality has to be kept in mind while bearing the various types of risks. Management of the assets bears a significant impact on liquidity vs. risk management. Post global financial crisis, Indian...

Standard credit risk models cannot explain the observed clustering of default, sometimes described as "credit contagion." This paper provides the first empirical analysis of credit contagion via direct counterparty effects. We examine the wealth effects of bankruptcy announcements on creditors...

We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...

Interconnectedness between economic institution and sectors, already recognised as a trigger of the great financial crisis in 2008-2009, is assuming growing importance in financial systems. In this paper we study contagion effects between corporate sectors using financial network models, in...

We study financial networks and reveal a new kind of systemic risk arising from what we call default ambiguity, i.e., a situation where it is impossible to decide which banks are in default. Specifically, we study the clearing problem: given a network of banks interconnected by financial...

The q-Gaussian generalization of the Merton framework allows pricing of the additional risk premium related to fluctuations of the variance of the market value of a company's assets, which can explain the observed level of short-term CDS spreads of investment grade issuers. The derived simple...