We investigate the interest rate risk exposures of euro area banks during times of crises and very low interest rates. First, we assess sensitivities of banks' stock prices to changes in the level, slope and curvature of the yield curve using the Bayesian DCC M‐GARCH model. Our findings reveal...

We propose an easy to implement yield curve extrapolation method to determine long-term interest rates suitable for regulatory valuation. We empirically evaluate this approach for the German nominal bond market, by estimating the model on bonds with maturities up to 20 years and assessing the...

1. We test the downward slopping equity term structure in an environment of negative interest rate. 2. We improve the measure of equity duration proposed by \citet*[][]{dechow2004}. 3. We show that the “short-duration” factor improves the performance of factor models. 4. We show that...

The Farm Credit System (FCS) is an important source of financing for many rural communities in the United States. As a government-sponsored enterprise (GSE), the FCS has a mandate to provide credit to farmers, ranchers, and aquatic producers at fair market terms. In recent decades, the System's...

We build a no-arbitrage model of the yield curves in a heterogeneous monetary union with sovereign default risk, which can account for the asymmetric shifts in euro area yields during the Covid-19 pandemic. We derive an affine term structure solution, and decompose yields into term premium and...

An entrepreneur chooses a relationship bank or market finance. The advantage of bank finance is that the quality of the entrepreneur’s project is identified early, allowing to liquidate low-quality projects. The loan contract induces an efficient continuation decision if the entrepreneur has...