In this paper we provide tools for assessing the house prices and housing valuation. Wedevelop two approaches: (i) borrowing capacity approach, and (ii) intrinsic value approach.The borrowing capacity of households, together with their down payment, implies how muchhousing they can attain. In...

Using state-of-the-art recurrent neural network architectures, this study attempts to predict credit default swap risk premia for BR[I]CS countries as accurately as possible. In the time series setting, these recurrent neural networks are ELMAN, NARX, GRU, and LSTM RNNs, considering local and...

We build a macro-finance model of shadow banking: the transformation of risky assets into securities that are money-like in quiet times but become illiquid when uncertainty spikes. Shadow banking economizes on scarce collateral, expanding liquidity provision in booms, boosting asset prices and...

We evaluate the viability of credit default swaps (CDS) spreads as substitutes for credit ratings. We focus on CDS spreads based on the obligations of financial institutions, particularly fifteen large financial institutions that were prominently involved in the recent financial crisis. Our...

We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest many standard models as special cases. The loss...

Models of financial distress rely primarily on accounting-based information (e.g. [Altman, E., 1968. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 23, 589–609; Ohlson, J., 1980. Financial ratios and the probabilistic prediction of...

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most...

We examine how a combination of credit market and asset quality information can jointly be used in assessing bank franchise value. We find that expectations of future credit demand and future asset quality explain contemporaneous bank franchise value, indicative of the feedback in credit market...

Using a DSGE framework, we discuss the optimal design of monetary policy for an economy where both retail banks and shadow banks serve as financial intermediaries. We get the following results. During crises times, a standard Taylor rule fails to reach sufficient stimulus. Direct asset purchases...