The topic of bank default risk in connection with government bailouts has recently attracted a great deal of attention …. In this paper, the question of how a bank’s default risk is affected by a distress acquisition is investigated …. Specifically, the government provides a bailout program of distressed loan purchases for a strong bank to acquire a bank in …

Using a novel dataset on central bank interventions to financial institutions, we examine the impact of capital … compensation investors demand for being exposed to the risk of large correlated drops in bank stock prices. DCRP is calculated … using options that provide a hedge against large drops in the price of a bank index and its individual components. We find …