This paper generalizes the existing asymptotic single-factor model to address issues related to industry heterogeneity, default clustering and capital requirement s parameter uncertainty in US retail loan portfolios. We argue that the Basel II capital requirement overstates the riskiness of...

In this paper, we empirically investigate the impact of the credit risk of Eurozone member countries on the stability of the Euro. In practice, in the absence of eurobonds, euro-area credit risk is induced though the credit default swaps of the member countries. The stability of the euro is...

This paper generalizes the existing asymptotic single-factor model to address issues related to industry heterogeneity, default clustering and parameter uncertainty of capital requirement in US retail loan portfolios. We argue that the Basel II capital requirement overstates the riskiness of...

We explore an inconsistency in the Basel Committee's Internal Ratings Based (IRB) rules: the IRB rules on corporate loans were calibrated to loan-level data, while the IRB rules on small business loans were calibrated with little, if any, information on small business loans. We argue that the...

We explore an inconsistency in the Basel Committee's Internal Ratings Based (IRB) rules: the IRB rules on corporate loans were calibrated to loan-level data, while the IRB rules on small business loans were calibrated with little, if any, information on small business loans. We argue that the...