The aim of this paper is to examine the impact of capital and risk transfer instruments on diversification and insolvency risk in a parent-subsidiary relationship. To better assess the effects, we compare this setting to the case of a holding company and an integrated financial group. In the...

During the past two years, private equity funds have acquired substantial portfolios of nonperformingloans from banks in Germany. Typically a private equity investor does notcommit funds unless exit strategies are clearly defined. The usual exit strategies for distresseddebt investors are “fix...

We survey the phenomenon of the growth of firms drawing on literature from economics,management, and sociology. We begin with a review of empirical ‘stylised facts’before discussing theoretical contributions. Firm growth is characterized by a predominantstochastic element, making it...

Die zunehmende Globalisierung der weltweiten Realwirtschaften hat zu einem Anstieg derKorrelationen zwischen den Aktienmärkten der unterschiedlichen Länder geführt. Damit einhergehendwird für internationale Aktieninvestoren eine Länderdiversifikation ihrer Aktienportefeuillesimmer weniger...

This paper studies the implications of cross-border financial integration for financialstability when banks’ loan portfolios adjust endogenously. Banks can be subjectto sectoral and aggregate domestic shocks. After integration they can share theserisks in a complete interbank market. When...

In the work of the Basel Committee there has been a tradition ofdistinguishing market from credit risk and to treat both categories independentlyin the calculation of risk capital. In practice positionsin a portfolio depend simultaneously on both market and credit riskfactors. In this case, an...

In the last few years it has been possible to observe decreasing interest margins forGerman universal banks. At the same time, institutions increasingly moved partof their business from interest to fee-earning activities. This study analyzes thedeterminants of non-interest income and its impact...

The minimisation of the return variance is one of the classical topics of portfolio theory. One of the main difficulties of variance minimisation is the neccessary input factors- variances and covariances- of the assets of the investment universe- are unknown. Often these variances and...

In this paper we investigate the interaction between a credit portfolio and another risktype, which can be thought of as market risk. Combining Merton-like factor models forcredit risk with linear factor models for market risk, we analytically calculate their interriskcorrelation and show how...