. Besides output price uncertainty, the firm faces additional sources of risk which are aggregated into an additive background … risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital …, irrespective of the risk attitude of the firm and the incidence of the multiple sources of uncertainty. Even though the …

This article reviews the principal features of structured finance instruments. Key to understanding the risk properties … modelling of the credit risk of the underlying asset pools. It is argued that structured finance ratings, though useful, have … intrinsic limitations in fully gauging the risk of these products, even as their complexity creates incentives to rely more …

and analyzes its implications for risk using a structural model of credit risk. The analysis suggests that market … financing has played a more important role in financing French firms than the euro area as a whole. The credit risk of French …

We use a classic Merton credit risk framework to argue that Islamic Banking Institutions (IBIs) face less incentive to … take on risks than Conventional Banking Institutions (CBI). IBIs have less incentive for risk shifting both in and outside … analysis suggests that the loss absorption capacity of Islamic banks leads to less risk taking and a more stable banking system …