I provide empirical evidence that ratings are relevant determinants of interest rates in the overnight interbank market, even after controlling for other observable factors about credit risk and solvency in banks' balance sheets. I develop a multiperiod network model that exploits this feature...

The paper quantifies the influence of interest rates and inflation rates on default rates of banks. By expanding the work of Duffee (1998), with the unspanned risks as in the work of Joslin, Priebsch, and Singleton (2014), we estimate a multifactor model with unspanned interest rates and...

I study the effect of interest rates on banks' lending standards. I find that low (high) interest rates discourage (encourage) screening but facilitate (hinder) effort provision. Less screening, as a result of low interest rates, increases the likelihood of a banking crisis. I further show that...

I study the effect of interest rates on banks' lending standards and find that low (high) interest rates discourage (encourage) screening but facilitate (hinder) effort provision. Less screening as a result of low interest rates increases the likelihood of a banking crisis. I further show that...

Building on the idea that precision of credit ratings matters for the efficiency of investors' portfolio decisions, the paper analyzes the equilibrium precision of ratings. Our analysis explains why ratings are noisy, exhibit rating inflation and vary across asset classes and over the economic...

We extend the financial guarantee insurance literature by modeling, under stochastic interest rates, private financial guarantees when the guarantor potentially defaults. By performing numerical simulations under plausible parameters values, we characterize the differential impact of the...