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 paper, the authors introduce a model of sovereign risk spreads, and find that reductions in public expenditure are a more powerful tool for reducing spreads than increases in revenues, and that cuts in current spending lower spreads by more than cuts in investment spending.
Abstract: This paper introduces fiscal policy in a model of sovereign risk spreads ("spreads"). Using panel data from emerging market countries, we find that reductions in public expenditure are a more powerful tool for reducing spreads than increases in revenues. Specifically, cuts in current spending lower spreads by more than cuts in investment spending, and they also lower spreads by more than increases in revenue. We also show that debt-financed current spending increases sovereign risk by more than tax-financed current spending, suggesting that international investors have some preference for the latter. In line with the empirical literature on the determinants of spreads, we find that liquidity and solvency indicators, as well as macroeconomic fundamentals, are also important determinants of spreads.
154 citations
Posted Content•
TL;DR: The most comprehensive treatment of the theoretical concepts and modelling techniques of quantitative risk management can be found in this article, where the authors provide the practical tools to solve real-world problems.
Abstract: This book provides the most comprehensive treatment of the theoretical concepts and modelling techniques of quantitative risk management. Whether you are a financial risk analyst, actuary, regulator or student of quantitative finance, Quantitative Risk Management gives you the practical tools you need to solve real-world problems. Describing the latest advances in the field, Quantitative Risk Management covers the methods for market, credit and operational risk modelling. It places standard industry approaches on a more formal footing and explores key concepts such as loss distributions, risk measures and risk aggregation and allocation principles. The book’s methodology draws on diverse quantitative disciplines, from mathematical finance and statistics to econometrics and actuarial mathematics. A primary theme throughout is the need to satisfactorily address extreme outcomes and the dependence of key risk drivers. Proven in the classroom, the book also covers advanced topics like credit derivatives. Fully revised and expanded to reflect developments in the field since the financial crisis Features shorter chapters to facilitate teaching and learning Provides enhanced coverage of Solvency II and insurance risk management and extended treatment of credit risk, including counterparty credit risk and CDO pricing Includes a new chapter on market risk and new material on risk measures and risk aggregation
154 citations
TL;DR: In this article, the authors report a mixed method analysis of the integration of environmental risks into the credit management of Canadian banks, concluding that Canadian banks are proactive regarding environmental examinations of loans and that there is a need for a more accountancy related reporting on environmental risk management in financial institutions.
Abstract: How do Canadian banks integrate environmental risks into corporate lending and where are they located compared with their global peers? In this paper we report a mixed method analysis of the integration of environmental risks into the credit management. The qualitative and quantitative analyses suggest that all analyzed Canadian commercial banks, credit unions and Export Development Canada manage environmental risks in credit management to avoid financial risks. Some of the institutions even connect environmental and sustainability issues with their general business strategies. Compared with other countries, Canadian banks are best in class, as all six Canadian commercial banks, comprising over 90 percent of Canadian assets, systematically examine environmental risks for credits, loans and mortgages. We conclude that Canadian banks are proactive regarding environmental examinations of loans and that there is a need for a more accountancy related reporting on environmental risk management in financial institutions. Further research is needed to be able to calculate costs and benefits of integrating environmental and sustainability issues into the credit risk management. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.
154 citations
TL;DR: In this article, the authors extend the literature on bank interest margins by providing empirical evidence using panel data covering the banking sector of fourteen OECD countries, treating each country's banking sector as a single representative firm viewed as a national risk-averse dealer setting loan and deposit rates to balance the random arrivals of loan requests and deposit supplies.
153 citations
TL;DR: In this article, the authors discuss the reasons for the difference between historical and risk neutral probabilities of default in credit markets, and explain the reason for the large difference between the historical data and the risk of default implied from bond prices (or from credit default swaps).
Abstract: A feature of credit markets is the large difference between probabilities of default calculated from historical data and probabilities of default implied from bond prices (or from credit default swaps). This paper illustrates and discusses the reasons for the difference between historical and risk neutral probabilities.
153 citations