Publications

Article

Modeling dependencies between rating categories and their effects on prediction in a credit risk portfolio

February 2018
Article

Structural GARCH: The Volatility-Leverage Connection

By: Robert F. Engle and Emil N. Siriwardane

During the financial crisis, financial firm leverage and volatility both rose dramatically. Consequently, institutions are being asked to reduce leverage in order to reduce risk, though the effectiveness depends upon the role of capital structure in volatility. To... View Details

Keywords: Leverage; Credit Risk; Crisis Management; Equity; Volatility; Credit; Risk Management; Financial Crisis

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24 Sep 2024
Research & Ideas

Why Small Businesses Deserve More Credit

It’s Wall Street doctrine that small firms struggle to raise capital at reasonable rates and are often rejected for credit lines and loans because banks think their risk profile is too high. “If you really... View Details

Keywords: by Rachel Layne; Financial Services; Banking

August 1995
Case

Credit General, SA

By: Andre F. Perold

The head of a bank's asset and liability committee has to approve an unexpectedly large overnight currency exposure or require at great cost that the exposure be reduced. View Details

Keywords: Risk Management; Currency; Financial Services Industry; Banking Industry

2025
Working Paper

Bank Capital and the Growth of Private Credit

By: Sergey Chernenko, Robert Ialenti and David Scharfstein

We show that business development companies (BDCs), a significant source of private credit, are very well capitalized according to bank capital frameworks. These types of private credit funds have median risk-based capital ratios of about 36%, which is 26 percentage... View Details

Keywords: Financing and Loans; Capital; Credit; Financial Institutions

SSRN

April 2010
Case

The Credit Crisis of 2008: An Overview

By: V.G. Narayanan, Fabrizio Ferri and Lisa Brem

This case examines the causes and consequences of the credit crisis of 2008 from a national and global perspective and explores the actions taken and proposed by the U.S. and European governments. View Details

Keywords: Credit; Financial Crisis; Crisis Management; Risk Management; Globalized Economies and Regions; Global Strategy; Mortgages; Performance Effectiveness; Financial Services Industry; United States

September 2006 (Revised August 2007)
Background Note

The History of Credit Agencies in the United States

By: F. Warren McFarlan and Tracy Manty

Provides a brief background on the history of credit agencies in the United States. Focuses on the mature process of data collection on an American consumer and how credit agencies share the information to determine proper credit risk and worthiness of a consumer. The... View Details

Keywords: Credit; United States

May 2013
Teaching Plan

High Wire Act: Credit Suisse and Contingent Capital

By: Clayton Rose and David Lane

Late in 2010, Credit Suisse CEO Brady Dougan and his team considered whether or not to issue contingent capital, which Swiss regulators would require by 2019. They faced a number of substantial issues, including: Would contingent capital actually work as conceptualized... View Details

Keywords: Financial Institutions; Capital Markets; Financial Crisis; Decision Choices and Conditions; Leadership; International Finance; Financial Liquidity; Risk and Uncertainty; Competitive Strategy; Financial Services Industry; Switzerland

14 Mar 2011
Research & Ideas

Keeping Credit Flowing to Consumers in Need

The credit crunch and subsequent collapse of the nonprime mortgage market claimed many victims, including hundreds of thousands of low- and moderate-income Americans who lost their homes and savings. Today, regulators and policymakers are... View Details

Keywords: by Sean Silverthorne; Financial Services; Construction; Real Estate

March 2009 (Revised May 2011)
Case

Risk Management at Wellfleet Bank: Deciding about "Megadeals"

By: Anette Mikes

Inspired by one of the few banks that successfully weathered the 2007-2009 credit crisis, the case illustrates risk management in a corporate finance business. Chief executive Alastair Dowes has to decide if the risk governance process is adequate to uncover mega-risks... View Details

Keywords: Risk Management; Decision Making; Performance Evaluation; Credit; Balance and Stability; Integrated Corporate Reporting; Decision Choices and Conditions; Negotiation Offer; Performance Effectiveness; Corporate Finance; Banking Industry

Research Summary

Time Varying Expected Returns, Stochastic Dividend Yields, and Default Probabilities: Linking the Credit Risk and Equity Literature (with George Chacko and Jens Hilscher)

In standard structural bond pricing models, the firm defaults once the market value of assets has fallen below a threshold. Expected returns, or at least dividend yields, are assumed to be constant, which implies that any asset value movement is permanent and has the... View Details

January 2005 (Revised October 2005)
Background Note

Standard & Poor's Sovereign Credit Ratings: Scales and Process

By: Rawi E. Abdelal and Christopher Bruner

Describes Standard & Poor's sovereign credit ratings scales and the credit rating process. In particular, describes the role and function of the rating committee and the analytical categories considered in arriving at a final sovereign credit rating. View Details

Keywords: Financial Markets; Credit; Bonds; Policy; Risk and Uncertainty; Measurement and Metrics; Forecasting and Prediction; Financial Services Industry

We show that business development companies (BDCs)—closed-end funds that provide a significant share of nonbank loans to middle market firms—are very well capitalized according to bank capital frameworks. They have median risk-based capital ratios of about 36% and,... View Details

23 Jan 2023
Research & Ideas

After High-Profile Failures, Can Investors Still Trust Credit Ratings?

During the financial crisis of 2008, major credit rating agencies faced sharp criticism for failing to recognize and warn of the risks of emerging instruments like mortgage-backed securities. Since that... View Details

Keywords: by Ben Rand

August 2011 (Revised October 2014)
Case

High Wire Act: Credit Suisse and Contingent Capital (A)

By: Clayton S. Rose and Aldo Sesia

Late in 2010, Credit Suisse CEO Brady Dougan and his team closed in on the decision of whether or not to issue contingent capital, which Swiss regulators would require by 2019. There were a number of substantial issues facing Dougan and his team, including whether... View Details

Keywords: Financial Institutions; Capital Markets; Financial Crisis; Decision Choices and Conditions; Leadership; International Finance; Financial Liquidity; Risk and Uncertainty; Competitive Strategy; Financial Services Industry; Switzerland

31 Aug 2009
Research & Ideas

Why Competition May Not Improve Credit Rating Agencies

In the run-up to the global financial crisis, credit rating agencies gave high marks to such risky financial vehicles as collateralized debt obligations, which few people understood. It has been argued that these ratings misled investors... View Details

Keywords: by Martha Lagace; Financial Services

July 2009 (Revised July 2009)
Case

Delphi Corp. and the Credit Derivatives Market (A)

By: Stuart C. Gilson, Victoria Ivashina and Sarah Abbott

In 2005, Jane Bauer-Martin, a hedge fund manager, is considering what she should do with the fund's large investment in the publicly traded bonds of Delphi Corp., a financially troubled auto parts supplier. Delphi is General Motor's key auto parts supplier, and, like... View Details

Keywords: Borrowing and Debt; Insolvency and Bankruptcy; Credit Derivatives and Swaps; Bonds; Financial Management; Risk Management