This paper explores the risk-based pricing strategies of banks issuing credit cards in the United States. We employ a unique database which combines both the risk of cardholders (demand side) and terms and conditions of credit cards (supply side) offered in the US. Our results suggest that the annual percentage rates paid per unit of long-term risk decrease, implying that high-risk cardholders ...

In this paper, we present two efficient algorithms for pricing credit default swaps based on a structural default model. In our model, the value of the firm is assumed to be the exponential of a jump-diffusion process. Our first algorithm to price a credit default swap within this framework is an efficient and unbiased Monte Carlo simulation. An excellent performance is obtained by first simula...

This paper examines the interaction between default risk and interest-rate risk in determining the term structure of credit default swap spreads at different industry sectors and credit rating classes. The paper starts with a parsimonious three-factor interest-rate dynamic term structure and projects the credit spread at each industry sector and rating class to these interest-rate factors while...

This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with exponential default barriers, analytical formulae are obtained for both credit default swap spreads and corporate bond yields. The credit dependence structure is i...

1 Background Credit cards have been widely used in the USA. The industry has matured so much that most households hold many credit cards and most consumers use credit cards as means of payment. They usually maintain their records on credit cards. In the USA, a total amount of credit card balances is about $700 billion. Because of the wide usage of credit cards, the term of cards is becoming a m...

This paper uses the canonical New Keynesian macroeconomic model—augmented with the standard financial accelerator mechanism—to study the extent to which disruptions in financial markets can account for U.S. economic fluctuations during the 1985–2009 period. The key feature of the model is that financial shocks drive a wedge between the required return on capital and the safe rate of return on h...

This paper presents a general equilibrium currency crisis model of the ’third generation’, in which the possibility of currency crises is driven by the interplay between private Þrms’ credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains sufficiently simple that the policy analysis can be conducted graphically. The analysis hinges on four m...

BACKGROUND Borrowing money is a common strategy to cope with health care costs. The impact of borrowing on households can be severe, leading to indebtedness and further impoverishment. However, the available literature on borrowing practices for health is limited. We explore borrowing practices for paying for health care by the poor in Cambodia and provide a typology, associated conditions, and...

We examine the relationships between credit default swap (CDS) premiums and bond yield spreads for nine emerging market sovereign borrowers. We find that these two measures of credit risk deviate considerably in the short run, due to factors such as liquidity and contract specifications, but we estimate a stable long-term equilibrium relationship for most countries. In particular, CDS premiums ...

Our model indicates that European firms across all size categories use trade credits to purchase 6%–15% of tangible fixed assets and 14%–30% intangible in the short-run. A long-run target adjustment shows large eventually replace most this temporary credit financing with cheaper sources funds. However, even long-run, small finance 4%–6% asset purchases 5%–10% using credit. Since smaller do not ...