represent innovations in risk management, not in risk itself, and will lead to enhanced wealth and more efficient risk …

these instruments in the banking industry which is heavily exposed to credit risk. However, while recent literature mainly …

We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric … choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent … with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of …

Synthetic collateralized debt obligations, or synthetic CDOs, are popular vehicles for trading the credit risk of a … the risk characteristics of the tranches of synthetic CDOs. The analysis shows that although the more junior CDO tranches …, they bear a majority of the credit risk. One implication is that credit risk disclosures relying on notional amounts are …