Credit Risk and Financial Regulations

Credit risk research examines why borrowers—corporations, banks, or governments—sometimes fail to repay their debts and how financial markets price that possibility into instruments like bonds and credit default swaps. Understanding what drives the gap between yields on risky debt and safer benchmarks, known as the credit spread, matters because mispricing those gaps contributed to the 2008 financial crisis and continues to shape how capital flows across the global economy. Researchers are actively debating how much of a credit spread reflects genuine default probability versus illiquidity or investor sentiment, and whether credit ratings from agencies like Moody's and S&P are genuinely informative or merely ratify what markets already know. A growing strand of work focuses on sovereign debt, asking how the same frameworks that apply to corporate borrowers must be adapted when the debtor is a government that controls its own currency and legal system.

Works

51,501

Total citations

412,678

Keywords

Credit Spread ChangesDefault RiskCredit Default SwapsBond YieldsCredit RatingsSovereign Debt