We propose a new approach to studying the pass-through of credit expansion policies that focuses on frictions, such as asymmetric information, that arise in the interaction between banks and borrowers. We decompose the effect of changes in banks' cost of funds on aggregate borrowing into the...

Using Federal Reserve (Fed) confidential stress test data, we exploit the gap between the Fed and bank capital projections as an exogenous shock to banks and analyze how this shock is transmitted to consumer credit markets. First, we document that banks in the 90th percentile of the capital gap...

Using Federal Reserve (Fed) confidential stress test data, we exploit the gap between the Fed and bank capital projections as an exogenous shock to banks and analyze how this shock is transmitted to consumer credit markets. First, we document that banks in the 90th percentile of the capital gap...

An important research question examined in the recent credit risk literature focuses on the proportion of corporate yield spreads which can be attributed to default risk. Past studies have verified that only a small fraction of the spreads can be explained by default risk. In this paper, we...

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread that can be explained by factors such as the possibility of default, liquidity, tax differentials and market risk. We contribute to this literature by assessing the ability of...

An important research question examined in the credit risk literature focuses on the proportion of corporate yield spreads attributed to default risk. This topic is reexamined in the light of the different issues associated with the computation of transition and default probabilities obtained...

This paper uses a dataset from one of the leading subprime lenders in America, containing detailed information on borrower and loan characteristics, finds that borrowers from the financial industry, who have higher financial literacy, are less likely to default. This effect cannot be explained...

Whereas recent studies on revolving lines of credit suggest a positive relationship between exposure at default and default probability on the line, this paper considers the relationship between two financial instruments through the simultaneous analysis of credit line utilization and default...

Individuals and firms pledge collateral to mitigate agency costs or contracting frictions in a world with asymmetric information. However, the option value theory suggests that once the mark-to-market asset valuation is below the current debt, the firms and individuals should default on their...