High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The accuracy of the approximation as well as its speed are compared to and shown to be superior to those of Monte Carlo simulation.

Despite massive large-scale asset purchases (LSAPs) by central banks around the world since the global financial crisis, there is a lack of empirical evidence on whether and how the composition of purchased assets matters for the pass through of unconventional monetary policy. Using rich mortgage-market data, we document that there is a “flypaper effect” of LSAPs, where the transmission of unco...

Determining contributions by sub-portfolios or single exposures to portfolio-wide economic capital for credit risk is an important risk measurement task. Often economic capital is measured as Valueat-Risk (VaR) of the portfolio loss distribution. For many of the credit portfolio risk models used in practice, the VaR contributions then have to be estimated from Monte Carlo samples. In the contex...

Inappropriate management in some fields such as credit allocation has imposed too many losses to financial institutions and even has forced some of them to go bankrupt. Moreover, large volume data sets collected by credit departments has necessitated utilizing highly accurate models with less complexities. Credit scoring models with classification and forecasting customers into two groups good ...

This article studies how the allocation structure of bank credit capital between state-owned and private enterprises government environmental expenditures affect pollution in China. The present literature argues that may play an important role quality improvement. However, these rarely consider State-owned (SOEs) enterprises; addition, they overlook interaction effects expenditures. Based on th...

We study an economy where agents are heterogeneous in terms of observable wealth and unobservable talent. Adverse selection forces creditors to ask for collateral. We study the two-way interaction between rationing in the credit market and the wages offered in the labor market. Both pooling and separating credit contracts can be offered in equilibrium. The minimum wealth needed to obtain a sepa...