Since bank credit lines are a major source of corporate funding, we examine the determinants of credit line usage with a comprehensive database of Spanish corporate credit lines. A line’s default status is a key factor driving its usage, which increases as a firm’s financial condition...

We propose a model of rating agencies that is an application of global game theory in which heterogeneous investors act strategically. The model allows us to explore the impact of the introduction of a rating agency on financial markets. Our model suggests that the addition of the rating agency...

We analyze the impact that the launch of the EMU had on the currency denomination of private international bond issues in 1990–2006 using micro-level data. Our stylized model predicts that the introduction of the euro would lead to an increase in the share of euro-denominated debt and a...

Many consumers who lack checking accounts are paying relatively high costs to access the nation's payments system. Legislation aimed at opening the system to these unbanked individuals has centered on requiring commercial banks to offer low-cost "lifeline" accounts. But will cost savings alone...

Covariance matrix forecasts of financial asset returns are an important component of current practice in financial risk management. A wide variety of models, ranging from matrices of simple summary measures to covariance matrices implied from option prices, are available for generating such...

Implied volatilities, as derived from option prices, have been shown to be useful in forecasting the subsequently observed volatility of the underlying financial variables. In this paper, we address the question of whether implied correlations, derived from options on the exchange rates in a...

Beginning in 1998, U.S. commercial banks may determine their regulatory capital requirements for financial market risk exposure using value-at-risk (VaR) models i.e., models of the time-varying distributions of portfolio returns. Currently, regulators have available three hypothesis-testing...

The Federal Reserve System is an important participant in the nation's payments system, which is the infrastructure used for transmitting and settling payments between individuals, firms, and government entities. For example, as reported in the Federal Reserve System's 2004 annual report, the...