Michael B. Gordy

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Within the past two years, important advances have been made in modeling credit risk at the portfolio level. Practitioners and policy makers have invested in implementing and exploring a variety of new models individually. Less progress has been made, however, with comparative analyses. Direct comparison often is not straightforward, because the di€erent(More)
Anil K Kashyap is the Edward Eagle Brown Professor of Economics and Finance in the Graduate School of Business at the University of Chicago and a consultant to the Federal Reserve Bank of Chicago. Jeremy C. Stein is a professor of economics in the Department of Economics at Harvard University. Both authors are research associates of the National Bureau of(More)
Estimates of average default probabilities for borrowers assigned to each of a ®nancial institution's internal credit risk rating grades are crucial inputs to portfolio credit risk models. Such models are increasingly used in setting ®nancial institution capital structure, in internal control and compensation systems, in asset-backed security design, and(More)
Risk measurement for derivative portfolios almost invariably calls for nested simulation. In the outer step one draws realizations of all risk factors up to the horizon, and in the inner step one re-prices each instrument in the portfolio at the horizon conditional on the drawn risk factors. Practitioners may perceive the computational burden of such nested(More)
Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on U.S. banks from 1993-2003. We find that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003. Large(More)
We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of(More)