We address the question whether the impact of default risk on equity returns dependson the financial system firms operate in. We compare results from asset pricing testsfor the German and the U.S. stock markets, where Germany is the prime-example fora bank-based financial system. We find that a...

In 2003, Swiss Re introduced a mortality-based security designed to hedge excessive mortality changes for its life book of business. The concern was apparently brevity risk, i.e., the risk of premature death. The brevity risk due to a pandemic is similar to the property risk associated with...

[...]This paper examines the benchmark role of the U.S.Treasury market and the features that make it an attractivebenchmark. In it, I examine the market’s recent performance,including yield changes relative to other fixed-income markets,changes in liquidity, repo market developments, and...

This paper uses Monte Carlo simulations to assess the impact of noisy inputparameters on the accuracy of estimated portfolio credit risk. Assumptionsabout input quality are derived from the distribution of historical samplestatistics commonly used in default risk modelling. The resulting...

This paper extends the approach of measuring and stress-testing the systemic risk of a banking sector in Huang, Zhou, and Zhu (2009) to identifying various sources of financial instability and to allocating systemic risk to individual financial institutions. The systemic risk measure, defined as...

We empirically analyse the appropriateness of indexing emerging market sovereign debt to USreal interest rates. We find that policy-induced exogenous increases in US rates raise default riskin emerging market economies, as hypothesised in the theoretical literature. However, we also findevidence...

In a country with high probability of default, higher interest rates may render the currency lessattractive if sovereign default is costly. This paper develops that intuition in a simple model andestimates the effect of changes in interest rates on the exchange rate in Brazil using data from...

This study provides a rigorous empirical comparison of structural and reduced-formcredit risk frameworks. As major difference we focus on the discriminative modelingof the default time. In contrast to the previous literature, we calibrate both approaches to the same data set, apply comparable...

In this paper, we explore the stochastic nature of implied recovery rates. We exploit the fact that differently-ranking debt instruments of the same issuer face identical default risk but different defaultconditionalrecovery rates. Specifically, we extract information from Credit Default Swaps...