Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks’ capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap...

Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks’ capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap...

In this paper, we present a new model that takes an arbitrage approach to the valuation of catastrophic risk bonds (CAT bonds). The model considers the sponsor's exposure to currency exchange risk and the risk of catastrophic events. We use a jump-diffusion process for catastrophic events, a...

Purpose – The purpose of this paper is to analyse the effects of the maturities of credit-enhanced debt contracts on the value of an insurer's loan-guarantee portfolios. Design/methodology/approach – The paper proposes a contingent-claims model and uses as measure of credit insurance risk,...

We extend the financial guarantee insurance literature by modeling, under stochastic interest rates, private financial guarantees when the guarantor potentially defaults. By performing numerical simulations under plausible parameters values, we characterize the differential impact of the...

This paper develops a continuous-time contingent claims analysis model to study the impact of credit insurance on investment. We find that under shareholders' wealth maximization, the presence of credit insurance yields high investment relative to the level of investment without credit...

The passage of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), which removed some of the freedom or latitude the FDIC had in resolving and closing insolvent institutions, makes it clear that regulatory closure rules are not invariant with regard to time and events....

A number of studies have argued that the thrift industry is not viable as it is presently structured and regulated because mortgage yields are inadequate to cover interest and operating costs. This hypothesis suggests that observed profitability is primarily the result of the tendency of the...