The purpose of this paper is to develop a model framework for the analysis of interactions between banking sector risk, sovereign risk, corporate sector risk, real economic activity, and credit growth for 15 European countries and the United States. It is an integrated macroeconomic systemic...

One of the earliest signs of the financial crisis in summer 2007 was the plunge in the indicaaes compiled from credit default swaps (CDSs) on a basket of subprime backed bonds. Recently, the worsening situation in the emerging countries has been perceptible in the steep rise of CDS spreads on...

One of the earliest signs of the financial crisis in summer 2007 was the plunge in the indicaaes compiled from credit default swaps (CDSs) on a basket of subprimebacked bonds. Recently, the worsening situation in the emerging countries has been perceptible in the steep rise of CDS spreads on...

We discuss the pros of adopting government-issued digital currencies as well as a supranational digital iCurrency. One such pro is to get rid of paper money (and coinage), a ubiquitous medium for spreading germs, as highlighted by the recent coronavirus outbreak. We set forth three policy...

The aim of the present research is to provide a new CoCo bond pricing method to assist analyses of both equity investors and fixed income investors. For this reason, we develop models in terms of PDEs where the spatial variable is the underlying stock. By using these approaches, one will be able...

Using a sample of 161 global banks in 23 countries, we examine the applicability of structural models and bank fundamentals to price global bank credit risk. First, we find that variables predicted by structural models (leverage, volatility, and risk-free rate) are significantly associated with...

Contingent convertible capital (CoCo) is a debt instrument that converts to equity or is written off if the issuing bank fails to meet a distress threshold. The conversion increases the issuer's loss-absorption capacity, but results in wealth transfers between CoCo holders and shareholders,...

In this paper, we develop a methodology to assess potential losses to the government that could arise from bank failures. The approach is intended to be simple, parsimonious, and used in real time. It generates an index that we call the banking sector contingent liability index (BCLI), based on...

The recent financial crisis has underscored the importance of contingent liabilities for sovereign risk management. However, quantifying contingent liabilities remains a difficult task and, partly as a result, they continue to be recognized as a liability only when the contingency materializes....

This paper proposes a simple method to estimate contingent liabilities that arise from (implicit and explicit) government guarantees to the banking sector. This method allows us to construct cross-country estimates on potential costs of bank failures. Furthermore, we empirically test whether the...