This paper presents background work that has been the basis for the development of the market and credit risk indicators (MRI and CRI, respectively) as published in the IMF's Global Financial Stability Report (GFSR) since September 2004. The fundamental idea was to build a set of Financial...

This paper examines the role of accounting, market and macroeconomic information in explaining the cross-sectional variation of credit default swap spreads. The study proposes a panel FAVAR methodological approach to combine the additional predictions from a long list of accounting, market and...

In the framework of the industrial economics approach to banking we extend the analysis of hedging against default on loans to the case of two types of credit risk. Standard results on the optimal hedge volume and the hedging effectivity from the single-risk case are shown to carry over to the...

The Australian credit default swap (CDS) market has been increasingly used by financial institutions to trade and manage credit risk. As a result, there has been greater use of the market as a source of credit risk pricing information. Similarities between CDS and bonds allow pricing in the two...

We use the industrial organization approach to the microeconomic s of banking, augment Ed by uncertainty and risk aversion, to ex a mine c r edit derivatives and macro derivatives as instruments t o hedge c r edit risk for a large commercial bank. In a partial-analytic framework we distinguish...

This paper finds that systematic default risk, or the event of widespread defaults in the corporate sector, is an important determinant of equity returns. Moreover, the market price of systematic default risk is one order of magnitude higher than the market price of other risk factors. In...

The increasing ability to trade credit risk in financial markets has facilitated its dispersion across the financial and other sectors. However, specific risks attached to credit risk transfer (CRT) instruments in a market with still-limited liquidity means that its rapid expansion may actually...

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic...

Motivated by the interplay between structural and reduced form credit models, we propose to model the firm value process as a time-changed Brownian motion that may include jumps and stochastic volatility effects, and to study the first passage problem for such processes. We are lead to consider...