This essay describes implications of the subprime crisis for accounting. First, I overview the institutional and market aspects of subprime mortgages and other positions, focusing on those with the greatest relevance for accounting. I explain how the investment performance of...

This essay describes implications of the subprime crisis for accounting. First, I overview the institutional and market aspects of subprime lending with the greatest accounting relevance. Second, I discuss the critical aspects of FAS 157's fair value definition and measurement guidance and...

We hypothesize and provide evidence that characteristics of banks' loan securitizations accounted for as sales determine the extent to which banks retain the risks of the securitized loans. We show that banks retain more risk when: (1) the types of loans have higher and/or less externally...

We hypothesize and provide evidence that certain general characteristics of banks' loan securitizations accounted for as sales determine the extent to which banks retain the risks of the securitized loans. We show that banks retain more risk when: (1) the types of loans have higher and/or less...

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...

Previous analysis of equilibrium asset prices often ignore the effects of delegated portfolio management and those of delegated portfolio management problems often ignore information and equilibrium asset prices. This paper develops a dynamic model that simultaneously considers optimal...

In this paper, we empirically compare two structural models (basic Merton and Vasicek-Kealhofer (VK)) and one reduced-form model (Hull-White (HW)) of credit risk. We propose here that two useful purposes for credit models are default discrimination and relative value analysis. We test the...