A conceptual framework for analyzing the credit rationing and the link between credit access and profitability is developed. The empirical analysis using data from manufacturing firms in Bulgaria, provides direct estimates of credit rationing and its impact on profitability in transition economies. The results from the switching regression suggest that the presence of credit market constraints ...

The goal of this work is to present a methodology aimed at valuation and hedging of basket credit derivatives, as well as of portfolios of credits/loans, in the context of several possible credit ratings of underlying credit instruments. The methodology is based on a specific Markovian model of a financial market. The research of T.R. Bielecki was supported by NSF Grant 0202851 and Moody’s Corp...

The mismatch between credit ratings of structured finance transactions and their true risks has been a source of the Global Financial Crisis which manifested in criticism of models and techniques applied by credit rating agencies (CRA). This paper provides an empirical study which assesses the historical performance of credit ratings for structured finance transactions and finds that CRAs do no...

The increasing dependence of individuals on debt financing raises several welfare considerations that we analyze in this paper. We develop a dynamic, competitive model of relationship banking to determine how regulation influences borrowing and lending behavior, and analyze how it affects welfare in the market. We characterize the lending regimes that arise based on public policy, and evaluate ...

The use of Big Data analytics for business improvements is a vital strategy for survival. In this paper, we report a study that investigates the role of BD analytics on consumer finance, credit card finance in China—a research area that has largely remained unexplored. The largeness and diversity of Chinese consumer market merit an urgent attention and understanding of role of BD analytics is s...

The purpose of this paper is to elucidate whether the supply side played a crucial role in causing credit crunch in 1990s. To this end, we estimated the supply and demand functions using prefectural panel data from 1990 to 2001, and calculate the shift of those functions. The results reveal that until 1996, the supply function largely shifted toward right, indicating that the supply side was no...

Hong Kong has long been under a fixed exchange rate regime, relying on the currency board to maintain currency stability. Currency board is a rule-based system, but because of the gradual dilution of the rules started in the late 1980s as a result of a number of monetary reforms, the currency board has gradually emphasized more on discretion in setting its policy. Such change in the board’s pol...

This research examines how credit card debt affects consumer spending. In five experimental and field studies, the authors demonstrate that outstanding credit card debt increases spending for consumers with high self-control. They also show that this effect can be eliminated by increasing the available credit on the credit card. Thus, when the available credit is low, consumers with greater sel...

Over the past fifteen years, U.S. households in the aggregate have devoted an increasing share of their after-tax income to the payment of financial obligations. Much of the increase is attributable to a rise in the level of credit card debt, which has raised the share of households’ aggregate after-tax income that is devoted to credit card payments. In turn, the rising share of credit card deb...