Recovery rate is essential to the estimation of the portfolio's loss and economic capital. Neglecting the randomness of the distribution of recovery rate may underestimate the risk. The study introduces two kinds of models of distribution, Beta distribution estimation and kernel density distribution estimation, to simulate the distribution of recovery rates of corporate loans and bonds. As is k...

The soundness and efficiency of banks is one of the important subjects that neglecting it can have adverse consequences for every country's economy. For economies depending on the money market, such as the Iran economy, this subject is more critical. Therefore, in this study, using panel data related to 16 Iranian banks for the annual period of 2010-2017, the economic efficiency was determined ...

*The ideas expressed here do not represent the opinions of the Board of Governors of the Federal System, or its staff. Part of this project was developed, and much of the early data collected, with Mikari Kashima at the Bank of Japan.

Emerging markets contain the vast majority of the world’s population. Despite the huge number of inhabitants, these markets still lack a proper finance infrastructure. One of the main difficulties felt by customers is the access to loans. This limitation arises from the fact that most customers usually lack a verifiable credit history. As such, traditional banks are unable to provide loans. Thi...

Why is this topic of house price indexes important? The Global Financial Crisis has several causes but a main cause was a housing bubble in the U.S. which led banks to make mortgage loans that were based on the assumption that house prices were not rising unusually quickly. If accurate regional house price indexes for the U.S. would have been widely available to the public, it is unlikely that ...

To understand better the role of loan officers in the origins of the financial crisis, we study a controlled experiment conducted by a large bank. In the experiment, the incentive structure of a subset of small business loan officers was changed from fixed salary to commission-based compensation. We use a diffin-diff design to show that while the characteristics of loan applications did not cha...

We present an empirical model of firm behavior in the presence of switching costs. Customers’ transition probabilities, embedded in firms’ value maximization, are used in a multiperiod model to derive estimable equations of a first-order condition, market share (demand), and supply equations. The novelty of the model is in its ability to extract information on both the magnitude and significanc...

Owing to the agentification of the Government Housing Loan Corporation, Japanese private financial institutions are now developing long-term fixed-rate loans. In order to reduce the risk of yielding mismatches between asset and liability, financial institutions will sell out their loans by securitization instead of holding loans themselves. Mortgage backed security (MBS) is a product of mortgag...