Search results for " default"

Credit Risk Research: Review and Agenda

2018

This article provides a comprehensive review of scholarly research on credit risk measurement during the last 57 years applying bibliometric citation analysis and elaborates an agenda for future research. The bibliography is compiled using the Institute for Scientific Information (ISI) Web of Science (WOS) database and includes all articles with citations over the period 1960–2016. Specifically, the review is carried out using 1695 articles across 72 countries published in 442 journals by 2928 authors. The findings suggest that credit risk research is multifaceted and can be classified into six streams: (1) defaultable security pricing, (2) default intensity modeling, (3) comparative analys…

Probabilistic semantics for categorical syllogisms of Figure II

2018

A coherence-based probability semantics for categorical syllogisms of Figure I, which have transitive structures, has been proposed recently (Gilio, Pfeifer, & Sanfilippo [15]). We extend this work by studying Figure II under coherence. Camestres is an example of a Figure II syllogism: from Every P is M and No S is M infer No S is P. We interpret these sentences by suitable conditional probability assessments. Since the probabilistic inference of \(\bar{P}|S\) from the premise set \(\{M|P,\bar{M}|S\}\) is not informative, we add \(p(S|(S \vee P))>0\) as a probabilistic constraint (i.e., an “existential import assumption”) to obtain probabilistic informativeness. We show how to propagate the…

Bank fragility and contagion: Evidence from the bank CDS market

2016

Understanding how contagion works among financial institutions is a top priority for regulators and policy makers who aim to foster financial stability and to prevent financial crises. Using bank credit default swap (CDS) data, we provide a framework for the evaluation of contagion among banks in different countries and regions during a period of prolonged financial distress. We measure contagion in terms of return spillovers, following a Generalized VAR (GVAR) approach. In addition, we propose an innovative framework to distinguish between two types of contagion: systematic (linked to global factors), and idiosyncratic (linked to bank specific factors). We find evidence of both types of co…

Probabilistic entailment in the setting of coherence: The role of quasi conjunction and inclusion relation

2013

In this paper, by adopting a coherence-based probabilistic approach to default reasoning, we focus the study on the logical operation of quasi conjunction and the Goodman-Nguyen inclusion relation for conditional events. We recall that quasi conjunction is a basic notion for defining consistency of conditional knowledge bases. By deepening some results given in a previous paper we show that, given any finite family of conditional events F and any nonempty subset S of F, the family F p-entails the quasi conjunction C(S); then, given any conditional event E|H, we analyze the equivalence between p-entailment of E|H from F and p-entailment of E|H from C(S), where S is some nonempty subset of F.…

Robust Recovery Risk Hedging: Only the First Moment Matters

2009

Credit derivatives are subject to at least two sources of risk: the default time and the recovery payment. This paper examines the impact of modeling the recovery payment on hedging strategies in a reduced-form model as well as a structural model. We show that all hedging approaches based on a quadratic criterion do only depend on the expected recovery payment at default and not the whole shape of the recovery payment distribution if the underlying hedging instrument (say, a defaultable zero coupon bond) jumps to or reaches a pre-specified value when the credit event occurs. This justifies assuming a \emph{certain} recovery rate conditional on default time and interest rate level. Hence, th…

A systematic review of sovereign connectedness on emerging economies.

2019

This article systematically reviews the academic literature on emerging market contagion in order to summarize what we have learnt about the transmission channels existing in these countries. Given the large body of academic research focused on this topic, we especially direct our attention to the strand of the literature that defines and empirically analyses this topic as the significant increase in the cross-market correlations between asset returns during crisis periods or when a shock occurs. The survey covers the findings on financial contagion in the stock, bond, exchange and credit default swap markets during a large period that covers several crises that have characterized the relat…

Essays on financial stability: an analysis based on NUTS2 and NUTS3 data for Italy

Monitoring and Market Power in Loan Markets

2000

Whether or not banks are engaged in ex ante monitoring of customers may have important consequences for the whole economy. We approach this question via a model in which banks can invest in either information acquisition or market power (product differentiation). The two alternatives generate different predictions, which are tested using panel data on Finnish local banks. We find evidence that banks’ investments in branch networks and human capital (personnel) contribute to information acquisition but not to market power. We also find that managing customers’ money transactions enhances banks ability to control their lending risks.

Financial Sector Reform After the Subprime Crisis: Has Anything Happened?

2015

We analyze the reactions of stock returns and the spreads of credit default swaps (CDS) of banks from Europe and the USA to four major regulatory reforms in the aftermath of the subprime crisis, employing an event study analysis. Contrary to public perception, we find that financial markets indeed reacted to the structural reforms enacted at the national level. The reforms succeeded in reducing bail-out expectations relative to the post-bail-out period, especially for systemic banks. The strongest effects were found for the Dodd–Frank Act and in particular for the Volcker rule. Bank profitability was affected in all countries, showing up in lower equity returns.

Microcredit as a tool for combating financial exclusion in Italy: the differences on a regional and local level

2016

This paper proposes a mapping of microcredit (social and productive) in the period from 2005 to 2013 in three main Italian regions. Later we offer a description of the micro-credit initiatives promoted by cooperative credit banks trying to take advantage of any differences in the initiatives promoted by other types of operators in terms of default rates of loans. The differences will be commented on the basis of the distinctive features of this category of these relationship banks in order to identify a possible way of development of microcredit in Italy