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...

This paper extends what we know about loss given default (LGD) on commercial loans by studying certain types of these loans that have been excluded from previous research but that may be more representative of loans held by small and mid-sized banks. We use a newly available dataset on...

This study aims to evaluate the techniques used for the validation of default probability (DP) models. By generating simulated stress data, we build ideal conditions to assess the adequacy of the metrics in different stress scenarios. In addition, we empirically analyze the evaluation metrics...

I analyze the repayment decisions of firms with multiple loans that, for liquidity constraints or strategic reasons, stop making payments in some but not all their loans. Using a sample of commercial loans from Colombia over the period 2002:03-2012:06, I find that firms are less likely to stop...

I analyze the repayment decisions of firms with multiple loans that, for liquidity constraints or strategic reasons, stop making payments in some but not all their loans. Using a sample of commercial loans from Colombia over the period 2002:03-2012:06, I find that firms are less likely to stop...

The quantitative analyses related to firms’ default prediction extensively analyzed which balance sheet ratios include significant information on the probability of default of a firm. These analyses are typically aimed at measuring a generic default risk, while no analyses are aimed at...

We study the effect of rollover risk on the risk of default using a comprehensive database of U.S. industrial firms during 1986–2013 This article is the most thoroughgoing empirical research to date to support the existence of a rollover risk effect on the risk of default. A one standard...

This article presents a comprehensive framework for valuing financial instruments subject to credit risk and collateralization. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats to financial markets. Some...

We examine the mechanism through which a financial crisis affects the default risk of real economy firms. Specifically, firms with strong dependence on bank financing suffer higher increases in default risk than firms with no such dependence. Conversely, firms relying solely on financing from...