Using two market-view variables, namely the regulatory forbearance fraction imbedded in the bank capital and the market-valued of the bank equity-to-assets ratio, derived from market equity and total liabilities from listed commercial banks in the U.S. and three countries (Japan, China, India)...

We develop an intensity-based model of municipal yields, making simultaneous use of the CDS premiums of the insurers and both insured and uninsured municipal bond transactions. We estimate the model individually for 61 municipal issuers by exploiting the dramatic decline in credit quality of the...

We propose a dynamic model of research and development (R&D) venture, which predicts that the positive relation between the firm's R&D investment and the expected stock returns strengthens with illiquidity. Consistent with the model's prediction, empirical evidence based on cross-sectional...

This paper develops a novel approach to measure the market expectations and term premia in the term structure of interest rates. Key components of this approach are generic impact measures of state variables in a Gaussian dynamic term structure model. These measures are inherent in a particular...

Abstract This paper deals with constructing Finite Dimensional Realization (FDR) of HJM with time-invariant hump shape volatility by applying Linear Realization Theory. Two realization algorithms, Standard Observable Canonical Realization and Jordan Canonical Realization, are introduced. The...

In this paper, using China's risk-free and corporate zero yields together with aggregate credit risk measures and various control variables from 2006 to 2013, we document a puzzle of counter-credit-risk corporate yield spreads. We interpret this puzzle as a symptom of the immaturity of China's...

In this paper, we show that most existing Gaussian dynamic term structure models (GDTSMs) can be nested as special cases under a unified Heath-Jarrow-Morton (HJM)-based framework of GDTSM construction. Our study provides not only a systematic way to examine the commonality of many seemingly...

We develop a theoretical model quantifying how firm-level pandemic exposure and sentiment, as informational shocks, affect a firm’s credit spread and default risk. Consistent with model predictions, we find significantly positive impacts on single-name credit default swap (CDS) spreads from...

We show that the cross-autocorrelation also exists in the global CDS markets and develop an econometric model to capture the global correlation structure. We study implications on the credit risk transmission and contagion risk. We find four main results: (i) credit risk transmission is through...