Topic
Credit risk
About: Credit risk is a research topic. Over the lifetime, 18595 publications have been published within this topic receiving 382866 citations.
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TL;DR: In this article, a new three-stage sequential technique, based on the DEA model and on the decomposition of risk into its internal and external components, was proposed for obtaining efficiency measures adjusted for risk and environment.
Abstract: Increased competition and the attempts of European banks to increase their presence in other markets may have affected the efficiency and credit risk in the banking system. The first aspect is the incentive in reducing costs in order to gain in competitiveness. The second is associated with their lack of knowledge of such markets and/ or acceptance of a higher risk in order to increase their market share. Despite the importance of these aspects, banking literature has usually analysed the effects of competition on the efficiency of banking systems without considering these aspects. The few studies that attempt to obtain risk adjusted efficiency measures do not consider that part of the risk is due to exogeneous circumstances. This article proposes a new three-stage sequential technique, based on the DEA model and on the decomposition of risk into its internal and external components, for obtaining efficiency measures adjusted for risk and environment. It is seen that the technique allows the use of any ex...
128 citations
Posted Content•
TL;DR: In this paper, a fixed effects panel data estimation of the determinants of European government default risk is undertaken by comparing yields on benchmark government bonds with high-quality private risk represented by interest rate swap yields.
Abstract: A fixed effects panel data estimation of the determinants of European government default risk is undertaken. Credit risk of sovereign debt is assessed by comparing yields on benchmark government bonds with high-quality private risk represented by interest rate swap yields. Using a new data-set from the European Commission (DG2's AMECO database), we find government default risk to depend positively on changes in the debt to GDP ratio and the variability of inflation and negatively on lagged inflation and changes in taxable capacity. Finally, there is evidence for persistence of government bond yield spreads reflecting differences in cross-country government default risk.
128 citations
TL;DR: The traditional statistical models and state-of-the-art intelligent methods for financial distress forecasting are summarized, with the emphasis on the most recent achievements as the promising trend in this area.
Abstract: The assessment of financial credit risk is an important and challenging research topic in the area of accounting and finance. Numerous efforts have been devoted into this field since the first attempt last century. Today the study of financial credit risk assessment attracts increasing attentions in the face of one of the most severe financial crisis ever observed in the world. The accurate assessment of financial credit risk and prediction of business failure play an essential role both on economics and society. For this reason, more and more methods and algorithms were proposed in the past years. From this point, it is of crucial importance to review the nowadays methods applied to financial credit risk assessment. In this paper, we summarize the traditional statistical models and state-of-the-art intelligent methods for financial distress forecasting, with the emphasis on the most recent achievements as the promising trend in this area.
128 citations
Patent•
20 Oct 2004
TL;DR: In this article, a method and system for managing financial risk through the use of post-paid processing during use of wireless services is presented within the scope of the following invention, which uses credit card authorization to pre-reserve credit card funds for wireless services in excess of planned usage.
Abstract: A method and system for managing financial risk through the use of postpaid processing during use of wireless services is presented within the scope of the following invention. The present invention uses credit card authorization to pre-reserve credit card funds for wireless services in excess of planned usage. Authorizations eliminate the credit risk associated with overages and payment timing, and also maintain a customer experience identical to postpaid processing. The authorizations are invisible to the customer and no charge is brought to a customer's credit card until the monthly bill is settled. Separating the authorization and settlement stages of retail wireless payment processing allows the branded wireless provider to avoid inherent areas of credit risk during the tenure of a customer's wireless service, while maintaining a familiar customer experience.
128 citations
TL;DR: In this article, a restriction on the form of possible default risk premia, which can be justified through exact and approximate notions of ''diversifiable default risk'' is proposed.
Abstract: Recent advances in the theory of credit risk allow the use of standard term structure machinery for default risk modeling and estimation. The empirical literature in this area often interprets the drift adjustments of the default intensity's diffusion state variables as the only default risk premium. We show that this interpretation implies a restriction on the form of possible default risk premia, which can be justified through exact and approximate notions of ``diversifiable default risk.'' The equivalence between the empirical and martingale default intensities that follows from diversifiable default risk greatly facilitates the pricing and management of credit risk. We emphasize that this is not an equivalence in distribution, and illustrate its importance using credit spread dynamics estimated in Duffee (1999). We also argue that the assumption of diversifiability is implicitly used in certain existing models of mortgage-backed securities.
128 citations