Fixing bugs is an important phase in software development and maintenance. In practice, the process of bug fixing may conflict with the release schedule. Such confliction leads to a trade-off between software quality and release schedule, which is known as the technical debt metaphor. In this article, we propose the concept of debt-prone bugs to model the technical debt in software maintenance....

This paper adopts a contingent-claim valuation framework to investigate the role of subordinated debt in alleviating the moral hazard problem in banking and providing the regulator with the information on the risk of bank assets. The incorporation of bankruptcy cost in the framework of the analysis provides some new evidence about the potential role of subordinated debt. The extent of market di...

We analyze whether the diversification discount is driven by the book value bias of corporate debt. Book values of debt may be a more downward biased proxy of the market value of debt for diversified firms, relative to undiversified firms, as diversification leads to lower firm risk. Thus, measures of firm value based on book values of debt undervalue diversified firms relative to focused firms...

This paper assesses whether the UK public finances were sustainable for the period 1919 to 2001 using a nonlinear representation of the debt to GDP ratio and thus provides a more robust test of debt sustainability. Empirical evidence supports debt sustainability. Moreover, the ESTAR representation is evidence that sustainability is the result of active debt management rather than tax-smoothing....

One of the most significant developments in international credit markets in recent years has been the trade in Collateralized Debt Obligations (CDO), which has enabled financial institutions to repackage the credit risk of an asset portfolio into tranches to be transferred to investors. The present paper evaluates the credit risk of such a portfolio and the related tranches by applying two prom...

During the past decade, a structured financial product called “Collateralized Debt Obligation (CDO)” has been drawing much attention of researchers and practitioners, and is now traded with growing liquidity. However, the approach for CDO pricing has been rather limited in the literature, largely because it is necessary to evaluate the time dependent distribution of the underlying cumulative lo...

any of the myriad problems in the u.s. mortgage market could have been contained, but together they caused a crisis that spread across the globe T HE causes of the crisis in subprime mortgages have become clear. They started with poor underwriting practices, which became legion. But damage was propagated at each stage of the complicated process in which a risky home loan was originated, then be...

Asset-backed securitization (ABS) has become a viable and increasingly attractive risk management and refinancing method either as a standalone form of structured finance or as securitized debt in Collateralized Debt Obligations (CDO). However, the absence of industry standardization has prevented rising investment demand from translating into market liquidity comparable to traditional fixed in...

Correlation-dependent derivatives, such as Asset-Backed Securities (ABS) and Collateralized Debt Obligations (CDO), have grown rapidly. Factor models in the conditional independence framework are widely used in practice to capture the correlated default events of the underlying obligors. An essential part of these models is the accurate and efficient evaluation of the expected loss of the speci...

In the Iranian economy, part of the governmentchr('39')s fiscal policies and liabilities is always financed by banks. As government debt to banks increases, the private sectorchr('39')s access to loans and facilities is limited. It can cause undesirable macroeconomic outcomes. This study investigates the macroeconomic effects of government debt on banks in Iran over 1972–2016 by using an SVAR m...