Starting from the Merton framework for firm defaults, we provide theanalytics and robustness of the relationship between defaultprobabilities and default correlations. We show that loans with higherdefault probabilities will not only have higher variances but also highercorrelations with other...

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...

This paper empirically investigates the impact of macroeconomic uncertainty on thespreads of individual rms' credit default swaps (CDS). While existing literature ac-knowledges the importance of the levels of macroeconomic factors in determiningCDS spreads, we nd that the second moments of these...

This paper presents a utility-based approach to value the borrower optimal behavior in presence of credit risk. The paper solves for the dynamic portfolio choices of a borrower. We thereby show that the presence of debt leads to a substantial modification in the borrower's behavior across states...