We present a banking model with imperfect competition in which borrowers’ access to credit is improved when banks are … able to transfer credit risks. However, the market for credit risk transfer (CRT) works smoothly only if the quality of … expansion of loans to unprofitable firms, which in the limit offsets the welfare gains from CRT completely. -- Credit risk …

Modelling portfolio credit risk is one of the crucial challenges faced by financial services industry in the last few …

years; the Treasury earns dividends on the preferred shares and gets warrants on the bank’s common equity. We develop a … terms of the program. We also find that the net value varies widely across banks. We compare our estimates with abnormal … stock price returns for the stress test banks at the time the terms of the CAP announced; we find correlations between 0 …

been purchased by non-financial agents, rather than held by banks. This is because banks are subject to capital … requirements and if MBS remain within the banking system, the fall in their value puts a strain on banks' balance sheets. The …

We highlight the ex ante risk-shifting incentives faced by a bank's shareholders/managers when CoCos (contingent … convertible capital) are part of the capital structure. The risk shifting incentive arises from the wealth transfers that the … principal writedown and nondilutive equity-converting CoCos, shareholders/managers have an incentive to take on more risk to …

probabilities than the corresponding Merton model if a firm’s credit quality is not too low. Otherwise the stochastic volatility …

productfeatures and also in the presence of issuers’ credit risk and jump risk in the underlying. …

This paper explores the implications of systemic risk in Credit Structured Finance (CSF). Risk measurement issues … tranches inflicted severe losses on banks, calling into question the credibility of Rating Agencies. I discuss the limits of … the standard risk frameworks in CSF (Gaussian, Single Risk Factor Model; GSRFM), popular among market participants. If …

. Lastly, while we find a negative relationship between issuer credit risk and overpricing, the effect is generally too small …