A public good approach to credit ratings – From concept to reality

Duan, Jin‐Chuan; Laere, Elisabeth Van

doi:10.1016/j.jbankfin.2012.03.012

Cited by 59 publications

(17 citation statements)

References 25 publications

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“…To measure distress risk ( Distress ), we obtain the 12‐month‐forward probability of default estimates from the Risk Management Institute (RMI) at the National University of Singapore. RMI adopts a forward intensity approach to evaluate the probability of default, and has made public these estimates together with model inputs since 2009 (Duan and Van Laere, ; Duan et al., ) . As a robustness check, we also estimate the probability of default using Shumway's () hazard model modified by Campbell et al.…”

Section: Sample Selection and Research Designmentioning

confidence: 99%

The Effect of Regulations on Pension Risk Shifting: Evidence from the US and Europe

Guan¹,

Lui

2016

Business Fin & Account

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This paper provides evidence that pension regulations can incentivize or curb risk shifting in the investment of defined benefit (DB) plan assets. We document that in the U.S., whereby the pension insurance premium charged by the Pension Benefit Guaranty Corporation (PBGC) is largely flat, financially distressed firms with severely underfunded plans shift pension investment risk. We further find that risk shifting is mitigated in the U.K. after the implementation of risk-adjusted pension insurance premium, and in the Netherlands where full pension funding is mandatory. Overall the results in this paper lend support to the view that structural flaws in the U.S. statutory pension insurance scheme incentivize high-risk sponsors to gamble their pension assets when distress terminations of their plans become foreseeable. JEL Classification: G11; G30; G32

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Section: Sample Selection and Research Designmentioning

confidence: 99%

The Effect of Regulations on Pension Risk Shifting: Evidence from the US and Europe

Guan¹,

Lui

2016

Business Fin & Account

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“…The default probabilities from traditional credit rating agencies, such as Moody's, S&P or Fitch, are less appropriate as these PDs are not point-in-time estimates and are not updated often enough. The RMI at the National University of Singapore (http://rmicri.org/home/) provides historical default probabilities estimates and forecasts for default in 1 to 24 months (see also Duan and Van Laere (2012); note that at the time of writing RMI forecast horison has been extended to 60 months). Table 7 reports the economic capital (ECap), VaR and ES calculated for the portfolio of 26 obligors at q = 99.9% and 99.99%.…”

Section: Iii3 Numerical Resultsmentioning

confidence: 99%

Fast Approximation of Loan Portfolio Loss

Bai¹,

Seppälä²,

Poon³

2014

Global Credit Review

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“…It is widely acknowledged that if managed properly, government's debt should not be a burden on the economy. The need for government's borrowing, management of the debt, including management of the debt-associated risk are analyzed by Drudi and Giordano (2000), Tomz and Wright (2007), Genberg and Sulstarova (2008), Vlasenko et al (2009), Fuentes and Saravia (2010), Bordo et al (2010), Baldacci et al (2011), Snieska and Draksaite (2010), Korinek (2011), Agliardi et al (2012), Knedlik and Von Schweinitz (2012), Gatzert and Martin (2012), , Duan and Van Laere (2012) and many more.…”

Section: Introductionthe Problem Genesismentioning

confidence: 99%

Prerequisites for Sustainable Government Borrowing Within Currency Board System

Drakšaitė

Snieška

Valodkienė

2016

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Financial stability of an economy is one of the most important priorities in many countries around the world. Although in many cases financial resources are preferably generated within a given economy, often there is a necessity to borrow the funds abroad. In order to maintain the sustainability of the economy, the borrowing abroad also should comply with the certain respective regulations. Specific regulations depend on the peculiarities of the economy itself. There is a complex set of the factors to be considered when analyzing the sustainability of the economy. In this article, the importance of the monetary system arrangement is emphasized, namely the case of currency board system is analyzed. The aim of the paper is to reveal the prerequisites for sustainable government borrowing within currency board system. The main research methods used are systematization and generalization of the scientific literature, quantitative and qualitative analysis of the primary and secondary data, graphic presentation of the data and results. Also the case of Lithuania's government borrowing is presented. For the evaluation of risk, @Risk package has been used. Conclusions of the paper provide the review of both general and the specific prerequisites for sustainable government borrowing within currency board system. The case study showed that given current government debt management policy and based on an assumption that in similar circumstances economy can perform similarly, it can be stated that in the long run Lithuania's borrowing can be considered as having the attributes of sustainability.

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A public good approach to credit ratings – From concept to reality

Cited by 59 publications

References 25 publications

The Effect of Regulations on Pension Risk Shifting: Evidence from the US and Europe

The Effect of Regulations on Pension Risk Shifting: Evidence from the US and Europe

Fast Approximation of Loan Portfolio Loss

Prerequisites for Sustainable Government Borrowing Within Currency Board System

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