Category Archives: Credit Risk

How are Bond Yields Affected by a Firm’s Ties to the Federal Government?

By | February 13, 2018

Courtesy of Reza Houston Do bondholders benefit from connections with the federal government?  We know that in the United States, there is ample evidence political connections confer benefits on firms.  Firms which make PAC contributions, hire lobbyists, or employ former politicians are more likely to be bailed out[1], avoid enforcement[2], and receive lucrative government contracts[3]. … Read More »

Basel Committee is on the Clock

By | December 12, 2016

The great financial crisis was caused in large part by complexity: complex products, complex institutions, and complex counterparty networks. Yet, post-crisis regulatory reforms designed to prevent future financial crises, principally Basel III, are equally complex. Sophisticated actors easily exploit complex systems, and large banks certainly are sophisticated – if nothing else. Several empirical studies have… Read More »