In practice, credit risk is measured by one of the two di€erent methodologies. One measures the prices and sensitivities of the credit linked instruments. Another measures the required collateral or capital needed to cover a potential default loss. This paper introduces a pricing methodology, which also determines the required capital. Conventionally the value-at-risk method is used to determin...

During the …nancial crisis and its aftermath, those segments of the economy most exposed to the accumulation of mortgage debt have tended to fare the worst. Whether it is by industry (construction), by geography (sand states), or by household (the most indebted), the presence of greater mortgage debt has led to weaker economic outcomes (see for example, Mian and Su…, 2009, and Dynan, 2012). Mor...

The R&E tax credit has never been effective and subsequent attempts to restructure it have not addressed the major deficiencies. Moreover, in the 25 years since the R&E tax credit was enacted, a steadily increasing number of countries have implemented or expanded competing tax incentives, which in many cases are better structured and larger in size. As a result, the relative impact of the US cr...

In contemporary credit portfolio management, the portfolio risk-return analysis of financial instruments using certain downside credit risk measures requires the computation of a set of Pareto-efficient portfolio structures in a non-linear, non-convex setting. For real-world problems, additional constraints, e. g. supervisory capital limits, have to be respected. Particularly for formerly non-t...

This paper examines the impact of unemployment insurance (UI) on credit markets. Exploiting heterogeneity in the generosity of unemployment insurance across US states and over time, we find that UI helps the unemployed avoid defaulting on their debt. For every $1,000 increase in maximum UI benefits, mortgage delinquency drops by 2% and the eviction rate drops by 10% among unemployed homeowners....

We study the difference between loan sales and credit default swaps. A bank lends money to an entrepreneur to undertake a positive NPV project. After the loan has been made, the bank finds out if the project benefits from monitoring and if it should sell the loan to release regulatory capital. A bank can lay off credit risk by either selling the loan or by buying credit insurance through a cred...

We examine shareholder wealth implications of supplying financing to customers. Robust results suggest that excess returns and changes in trade receivables are directly and significantly related. Further evidence indicates the value of receivables is higher for suppliers with stronger motives relating to operating and contracting costs. The results also suggest a discounted value of receivables...

This study is on the determinants of credit access by small scale farmers in Dekina Local Government Area of Kogi State, Nigeria. The specific objectives are to; identify the major source of credit among the small scale farmers; estimate the determinants of farmers’ access to formal credit; compare the farm income of farmers who have access to formal credit and those who have not and identify c...

How good is “good”? Based on the assumption that asymmetric information exists between decentralized relationship managers who create soft information in credit rating systems and a bank’s management, this study deals theoretically and empirically with the existence of rater effects in bank internal credit ratings. If relationship managers have an incentive to manipulate credit ratings, the rat...