Bank risk-based capital (RBC) standards require banks to hold differing amounts of capital for different classes of … assets, based almost entirely on a credit risk criterion. The paper provides both a theoretical and empirical framework for … evaluating such standards. A model outlining a pricing methodology for loans subject to default risk is presented. The model …

To understand the effects of regulation on mortgage risk, it is instructive to track the history of regulatory changes …-changing regulation impacted mortgage lending and risk. We use cross-sectional differences in the time- series variation of delinquency …. However, in developed countries with fairly stable systems of financial regulation, it is difficult to track these effects. We …

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the …

Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk … anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications … for corporate leverage. The risk anomaly generates a simple tradeoff theory: At zero leverage, the overall cost of capital …

, we document that insurers' risk taking was distorted and increased in response to the new regulation … were replaced as inputs to capital regulation. Second, the redesigned system ensures capital buffers sufficient to …

Traditionally, banks and financial intermediaries borrow short and lend long. This causes a risk of negative net worth … of deposit insurance as a function of capital-asset ratio for a bank with demand liabilities and longer term, default-risk …

risk management; and ii) not all the risks they face can be frictionlessly hedged in the capital market. This approach … allows us to show how bank-level risk management considerations should factor into the pricing of those risks that cannot be …