Default risk
Risk mutualization and financial stability: recovering and resolving a central counterparty
This paper investigates how financial market participants respond to risk mutualization implemented by a CCP using assessments after a large credit loss.
Credit data: Brexit gloom lifting for UK companies?
David Carruthers of Credit Benchmark looks at the most recent trends in bank-sourced credit data
Exchanges and FCMs clash over bitcoin clearing carve-out
Market participants say CME, CBOE should clear bitcoin futures separately
Issuer bias in corporate ratings toward financially constrained firms
This paper considers whether the rating agency attempts to mitigate the feedback effect through its rating actions. Using Moody’s issuer ratings over 1982–2009, the paper shows that firms with greater external financing constraints are less likely to be…
Credit data: reasons to like Europe and G-Sibs
Bank estimates offer alternative view on probability of default risk
CCPs and banks at odds over custodian losses
Market participants do not see eye-to-eye on loss sharing in the event of custody bank failure
Bailout obsession holds back US CCP resolution regime
Dodd-Frank leaves legal uncertainty, but proposed alternatives could be even worse
Portfolio credit risk model with extremal dependence of defaults and random recovery
This paper proposes a portfolio credit risk model with random recovery rates.
Goodness-of-fit for discrete-choice models of borrower default
This paper demonstrates that the rank-order tests are unreliable for assessing models to be used to predict probabilities.
Default risk charge: modeling framework for the “Basel” risk measure
This paper presents a comprehensive model framework for DRC that is compliant with the revised Basel regulatory framework.
Banks voice fresh concerns over CCP non-default losses
Dealers could face cash calls to recapitalise an ailing CCP that suffers a critical non-default loss under FSB proposals
Default risk of money-market fund portfolios
This paper proposes a semi-analytic approach to quantify the default risk associated with Money-Market Fund (MMF) portfolios.
Cutting Edge introduction: systematic systematic factor models
Credit factor models tend to obscure the economics in favour of tractability – and this puts them at odds with rigorous arbitrage-free martingale pricing methods. To resolve this, quants are looking more closely at what a systematic risk factor actually…
Isda AGM: CCP ‘Armageddon’ could lead to sovereign default, warns HSBC exec
Single bank default could affect multiple CCPs, leading to crippling default contribution for existing members and a chain of bank failures
The impossibility of DVA replication
The impossibility of DVA replication
Spanish banks allowed to ignore default risk for sovereign bonds
Banco de España is one of a number of European supervisors allowing its banks to ignore a Basel 2.5 requirement to model default risk on government bonds
Risk Annual Summit: Bank deleveraging 'might not be cyclical'
Aircraft, shipping and project finance all set to lose out as banks seek to constrain capital consumption, panellists warn
Variable selection in default risk models
Research Papers
US distressed debt funds look to euro crisis for opportunities
Stressful situations
Planning for bankruptcy of a major counterparty
Backup plan
HKEx moves to introduce margins for cash clearing members
HKEx plans to beef up its risk management following the bankruptcy of Lehman Brothers in September 2008 by introducing margin rules and seeking more funds from cash clearing members. The move would bring cash clearing more in line with existing…