The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by other defaulting firms (a domino effect being also...

Using a new dataset of bid and offer quotes for credit default swaps, we investigate the relationship between theoretical determinants of default risk and actual market premia using cross sectional regressions. These theoretical determinants are variance risk premia, implied volatility and the...

This paper employs a time-varying parameter state space model to explore the impact of the crisis on bank retail rates in the euro area. We show that σ-convergence in interest rates has been adversely affected by the crisis and quantify the role of sovereign and credit risk as two alternative...

The estimation of banks? marginal probabilities of default using structural credit risk models can be enriched incorporating macro-financial variables readily available to economic agents. By combining Delianedis and Geske?s model with a Generalized Dynamic Factor Model into a dynamic t-copula...

The paper analyzes a two-factor credit risk model allowing to capture default and recovery rate variation, their mutual correlation, and dependence on various explanatory variables. At the same time, it allows computing analytically the unexpected credit loss. We propose and empirically...

Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank...

Using a panel of Colombian banks and quarterly data between 1996:1 and 2010:3, we study the relationship between short-run adjustments in bank capital buffers and the business cycle. We follow a partial adjustment framework and control for several variables that have been identified as important...

The recursive prediction and filtering formulas of the Kalman filter are difficult to implement in nonlinear state space models. For Gaussian linear state space models, or for models with qualitative state variables, the recursive formulas of the filter require the updating of a finite number of...

The current collapse of credit markets has left small and medium enterprises (SMEs) facing severe credit rationing. The practice of screening borrowers by risk level has become a paramount consideration for both lenders and firms. This paper represents the first empirical test of the screening...

The emergence of credit risks in recent years has burned the world economy leading to the onset of one of the toughest global economic crisis. Superficiality and incompetence demonstrated by the banking system in credit risk analysis has seen the highest peaks. Banks had as main objective...