The recent financial crisis raised awareness of the need for a framework for conducting macroprudential policy. Identifying as early as possible and addressing the buildup of endogenous imbalances, exogenous shocks, and contagion from financial markets, market infrastructures, and financial...

We characterize diversification in corporate credit using a new class of dynamic copula models which can capture dynamic dependence and asymmetry in large samples of firms. We also document important differences between credit spread and equity return dependence dynamics. Modeling a decade of...