In recent years, the Chinese government has highly emphasized the development of bond market, which plays an important role during the development of macro-economy and finance sector in China, especially on some crucial steps concerning national economy and the people’s livelihood, as well as reforms in banking industry and the financial innovations. However, the bond market is smaller compared...

We develop a dynamic general equilibrium model of capital accumulation where credit is intermediated by banks operating in a Cournot oligopoly. The number of banks affects capital accumulation through two channels. First, it affects the quantity of credit available to entrepreneurs. Second, it affects banks’ decisions to collect costly information about entrepreneurs, and thus determines the ef...

We apply standard Merton and enhanced Merton-D-Vine copula model for the measurement of credit risk on the basis of accounting and stock market data for 4 companies from Prague Stock Exchange, in the midterm horizon of 4 years. Basic Merton structural credit model is based on assumption that firm equity is European option on company assets. Consequently enhanced Merton model take in account mar...

In recent years, credit risk has played a key role in risk management issues. Practitioners, academics and regulators have been fully involved in the process of developing, studying and analysing credit risk models in order to find the elements which characterize a sound risk management system. In this paper we present an integrated model, based on a reduced pricing approach, for market and cre...

Preface Modeling of credit risk has become a very important and rapidly expanding field of mathematical finance in the last fifteen years. Apart from a purely academic interest, the credit derivatives industry clearly needs advanced mathematical models to objectively assess and hedge this kind of risk, which was only underlined by the recent financial crisis. Although there exist several credit...

Traditional evaluation of firm’s market value in credit risk analysis could be contaminated by market noises. The purpose of this article is to price the credit risk in the distance to default with particle filter approach. Compared to the traditional methods, the estimate of the distance to default could be evaluated precisely. Another finding is that the inflation of variation in firm’s value...

Previously circulated under the title \Banks and credit derivatives: Is it always good to have more risk management tools?" Abstract We model the eeects on banks of the introduction of a market for credit derivatives; in particular, credit default swaps. A bank can use such swaps to temporarily transfer credit risks of their loans to others, reducing the likelihood that defaulting loans trigger...

Financial trade credit theories argue that suppliers have an advantage over other lenders in financing credit-constrained firms. While the reasons for this advantage differ across theories, they are usually related either to product characteristics or to market structure. We exploit this insight to analyze trade credit volume and contract terms. Ceteris paribus, service suppliers offer as much ...

We model the effects on banks of the introduction of a market for credit derivatives; in particular, credit-default swaps. A bank can use such swaps to temporarily transfer credit risks of their loans to others, reducing the likelihood that defaulting loans trigger the bank’s financial distress. Because credit derivatives are more flexible at transferring risks than are other, more established ...

Counterparty credit risk has become one of the highest-profile risks facing participants in the financial markets. Despite this, relatively little is known about how counterparty credit risk is actually priced. We examine this issue using an extensive proprietary data set of contemporaneous CDS transaction prices and quotes by 14 different CDS dealers selling credit protection on the same under...