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In reduced-form pricing models, it is usual to assume a fixed recovery rate to obtain the probability of default from credit default swap prices. An alternative credit risk measure is proposed here: the maximum recovery rate compatible with observed prices. The analysis of the recent debt crisis in Argentina using this methodology shows that the correlation between the maximum recovery rate and implied default probabilities turns negative in advance of the credit event realization. This empirical finding suggests that the maximum recovery rate can be used for constructing early warning indicators of financial distress.

Banks and Banking --- Financial Risk Management --- Money and Monetary Policy --- International Financial Markets --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Interest Rates: Determination, Term Structure, and Effects --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Crises --- Monetary economics --- Finance --- Financial services law & regulation --- Economic & financial crises & disasters --- Credit default swap --- Credit --- Yield curve --- Credit risk --- Financial crises --- Money --- Financial services --- Financial regulation and supervision --- Interest rates --- Financial risk management --- Argentina

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Examina la cuestión del riesgo moral en relación con los préstamos del FMI a países en dificultades financieras. Las preocupaciones en torno al riesgo moral han ocupado un lugar prominente en las recientes discusiones sobre cómo reformar la arquitectura del sistema financiero internacional y cuál debería ser el papel del FMI.

Banks and Banking --- Finance: General --- Financial Risk Management --- Industries: Financial Services --- General Financial Markets: Government Policy and Regulation --- General Financial Markets: General (includes Measurement and Data) --- Financial Crises --- Financial Institutions and Services: General --- Interest Rates: Determination, Term Structure, and Effects --- Finance --- Economic & financial crises & disasters --- Moral hazard --- Emerging and frontier financial markets --- Financial crises --- Systemically important financial institutions --- Yield curve --- Financial risk management --- Financial services industry --- Interest rates --- Russian Federation

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Examines the issue of moral hazard inrelation to IMF loans to countries in financial difficulties. Concerns about moral hazard have had a prominent place in recent discussions on how the architecture of the international financial system should be reformed and what the IMF’s role should be.

Loans, Foreign --- Banks and Banking --- Economic & financial crises & disasters --- Emerging and frontier financial markets --- Finance --- Finance: General --- Financial Crises --- Financial crises --- Financial Institutions and Services: General --- Financial Risk Management --- Financial risk management --- Financial services industry --- General Financial Markets: General (includes Measurement and Data) --- General Financial Markets: Government Policy and Regulation --- Industries: Financial Services --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- Moral hazard --- Systemically important financial institutions --- Yield curve --- Russian Federation

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This September 2003 issue of the Global Financial Stability Report highlights that since March 2003, further progress has been made in addressing the lingering effects of the bursting of the equity price bubble. Household and corporate balance sheets have continued to improve gradually and corporate default levels have declined. Companies in mature markets have cut costs, enhancing their ability to cope with slower growth and other potential difficulties. Corporations—particularly in the United States—have made good progress in their financial consolidation efforts and are in a better financial position to increase investment spending.

Exports and Imports --- Finance: General --- Investments: Bonds --- Investments: Stocks --- Industries: Financial Services --- Banks and Banking --- General Financial Markets: General (includes Measurement and Data) --- International Investment --- Long-term Capital Movements --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Wages, Compensation, and Labor Costs: General --- Interest Rates: Determination, Term Structure, and Effects --- Finance --- Investment & securities --- International economics --- Labour --- income economics --- Macroeconomics --- Financial services law & regulation --- Emerging and frontier financial markets --- Stocks --- Stock markets --- Securities markets --- Financial markets --- Financial institutions --- Yield curve --- Financial services --- Financial services industry --- Capital movements --- Stock exchanges --- Bonds --- Interest rates --- United States --- Income economics

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"In this book, two of America's leading economists provide the first integrated treatment of the conceptual, practical, and empirical foundations for credit risk pricing and risk measurement. Masterfully applying theory to practice, Darrel Duffie and Kenneth Singleton model credit risk for the purpose of measuring portfolio risk and pricing defaultable bonds, credit derivatives, and other securities exposed to credit risk. The methodological rigor, scope, and sophistication of their state-of-the-art account is unparalleled, and its singularly in-depth treatment of pricing and credit derivatives further illuminates a problem that has drawn much attention in an era when financial institutions the world over are revising their credit management strategies."--Jacket.

Credit --- Risk management. --- Management. --- Approximation. --- Asset. --- Balance sheet. --- Bankruptcy. --- Basis Point. --- Bond (finance). --- Bond Yield. --- Bond market. --- Bond valuation. --- Broker-dealer. --- Business cycle. --- Calculation. --- Call option. --- Capital market. --- Capital requirement. --- Cash flow. --- Characteristic function (probability theory). --- Coefficient. --- Collateralized debt obligation. --- Conditional probability distribution. --- Counterparty. --- Coupon (bond). --- Coupon. --- Covariance matrix. --- Credit (finance). --- Credit derivative. --- Credit event. --- Credit rating. --- Credit risk. --- Credit spread (options). --- Currency. --- Debt. --- Default Rate. --- Discounts and allowances. --- Diversification (finance). --- Economics. --- Estimation. --- Event of default. --- Face value. --- Financial institution. --- Forward rate. --- Government bond. --- Government debt. --- Hedge (finance). --- High-yield debt. --- Interest rate swap. --- Interest rate. --- Interest-Rate Derivative. --- Investment. --- Investor. --- Issuer. --- Lehman Brothers. --- Leverage (finance). --- Liability (financial accounting). --- Libor. --- Likelihood function. --- Long run and short run. --- Market Value Of Equity. --- Market liquidity. --- Market price. --- Market value. --- Markov chain. --- Markov process. --- Moneyness. --- Parameter. --- Payment. --- Payout. --- Present value. --- Price Change. --- Pricing. --- Probability distribution. --- Probability of default. --- Probability. --- Random variable. --- Rate of return. --- Repurchase agreement. --- Risk management. --- Risk premium. --- Risk-neutral measure. --- Securitization. --- Short rate. --- Short-rate model. --- Skewness. --- Special case. --- Spread option. --- Standard deviation. --- Stochastic volatility. --- Swap (finance). --- Swap rate. --- Tax. --- Time horizon. --- Time series. --- Trader (finance). --- Tranche. --- Valuation (finance). --- Value (economics). --- Variance. --- Yield curve. --- Yield spread. --- Zero-coupon bond.