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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Posted Content•
TL;DR: In this article, the authors used data envelopment analysis (DEA) to investigate the efficiency of the Greek commercial banking industry over the period 2000-2004, and found that the inclusion of loan loss provisions as an input increases the efficiency scores, but off-balance sheet items do not have a significant impact.
Abstract: This paper uses data envelopment analysis (DEA) to investigate the efficiency of the Greek commercial banking industry over the period 2000-2004. Our results indicate that the inclusion of loan loss provisions as an input increases the efficiency scores, but off-balance sheet items do not have a significant impact. The differences between the efficiency scores obtained through the profit-oriented and the intermediation approaches are in general small. Banks that have expanded their operations abroad appear to be more technical efficient than those operating only at a national level. Higher capitalization, loan activity, and market power increase the efficiency of banks. The number of branches has a positive and significant impact on efficiency, but the number of ATMs does not. The results are mixed with respect to variables indicating whether the banks are operating abroad through subsidiaries or branches.
268 citations
TL;DR: The authors showed that the credit quality of corporate debt issuers deteriorates during credit booms, and that this deterioration forecasts low excess returns to corporate bondholders, and used these findings to investigate the forces driving time-variation in expected corporate bond returns.
Abstract: We show that the credit quality of corporate debt issuers deteriorates during credit booms, and that this deterioration forecasts low excess returns to corporate bondholders The key insight is that changes in the pricing of credit risk disproportionately affect the financing costs faced by low quality firms, so the debt issuance of low quality firms is particularly useful for forecasting bond returns We show that a significant decline in issuer quality is a more reliable signal of credit market overheating than rapid aggregate credit growth We use these findings to investigate the forces driving time-variation in expected corporate bond returns
267 citations
Book•
01 Jul 1999
TL;DR: In this paper, the authors introduce the financial services industry - depository institutions, insurance companies, financial service industry - securities firms and investment banks, mutual funds, and finance companies why are financial intermediaries special risks of financial mediation.
Abstract: Part 1 Introduction: the financial services industry - depository institutions the financial services industry - insurance companies the financial service industry - securities firms and investment banks the financial services industry - mutual funds the financial services industry - finance companies why are financial intermediaries special risks of financial mediation. Part 2 Measuring risk: interest rate risk I interest rate risk II market risk credit risk - individual loan risk credit risk - loan portfolio and concentration risk foreign exchange risk sovereign risk liquidity risk. Part 3 Managing risk: liability and liquidity management deposit insurance and other liability guarantees capital adequacy product diversification geographic diversification - domestic geographic diversification - international futures and forwards options, caps, floors, and collars swaps, loan sales and other credit management techniques securitization.
266 citations
TL;DR: The authors embeds a structural model of credit risk inside a dynamic continuous-time consumption-based asset pricing model, which allows us to price equity and corporate debt in a unified framework.
Abstract: We embed a structural model of credit risk inside a dynamic continuous-time consumption-based asset pricing model, which allows us to price equity and corporate debt in a unified framework. Our key economic assumptions are that the first and second moments of earnings and consumption growth depend on the state of the economy which switches randomly, creating intertemporal risk, which agents prefer to resolve sooner rather than later, because they have Epstein-Zin-Weil preferences. Agents optimally choose dynamic capital structure and default times. For a dynamic cross-section of firms, our model endogenously generates a realistic average term structure and time series of actual default probabilities and credit spreads, together with a reasonable levered equity risk premium, which varies with macroeconomic conditions.
264 citations
Posted Content•
TL;DR: In this article, the authors argue that although the ratings provide accurate rank-orderings of default risk, the meaning of specific letter grades varies over time and across agencies, and that a reassessment of the use of ratings and the adequacy of public oversight is overdue.
Abstract: Investors and regulators have been increasing their reliance on the opinions of the credit rating agencies. This article shows that although the ratings provide accurate rank-orderings of default risk, the meaning of specific letter grades varies over time and across agencies. Noting that current regulations do not explicitly adjust for agency differences, the authors argue that a reassessment of the use of ratings and the adequacy of public oversight is overdue.
264 citations