Title: Credit Rating Impact on Information Environment – A study on the informational impact of credit ratings in financial markets using equity analysts’ performance as proxy. Introduction: The credit rating agencies provide risk assessment for a massive amount of financial assets around the world. These risk assessments are in turn used by numerous different market participants. The general idea behind this industry is that the credit ratings provide additional information or alternatively increase the quality of information in financial markets. Recent studies (most of which is written after the financial crisis of 2008) argue that there are several issues in the rating processes leading to failure to provide accurate ratings. Other studies still claim that credit rating agencies still provide useful information or alternatively increase the quality of information by sorting and ranking public knowledge of assets. We see the need for an investigating study examining the informational benefits of credit rating in the information environment of markets. Research Approach: How does the issuing of credit ratings impact the information environment in financial markets? Purpose: The study aim to contribute to the understanding of the current and historical effects that credit ratings have, and have had, on the information quality of markets and hence the efficiency of markets. Method: Our study takes a deductive research approach where the methodology is one of a quantitative and explanatory character. To analyze the effects on market information we use the BKLS model (Barron, Kim, Lim & Stevens, 1998), which uses equity analysts’ performance as proxy for the information environment. These data are then used in a long-term time-series study looking for long-term changes in analysts’ performance with yearly observations. Furthermore we test the instant market effects on stock prices from the issuing of a credit rating in a secondary short-term time-series study with daily observations. Conclusions: We find that the issuing of a credit rating in fact decreases the amount/quality of information available in financial markets (both public and private information). We contribute these effects to conflicts of interest in the rating processes and agency problems in the relationship between issuer and credit rating agency. Several practical examples of this are found such as ratings shopping, solicitation of ratings issuing, agencies offering consultant services and the lack of regulatory measures taken by regulators such as ESMA and SEC. We propose several ways of developing the research in this field; most importantly we want to see future studies on the differences between solicited/unsolicited issuing of ratings.

In diesem Beitrag frage ich [...], ob die Bürger Deutschlands den Einstieg der EU in die transnationale finanzielle Hilfe unterstützen, d.h. ob sie sich transnational fiskalpolitisch solidarisch zeigen. Unter transnationaler fiskalpolitischer Solidarität verstehe ich eine Zahlungsbereitschaft, die überschuldeten EU-Ländern, die sich in einer akuten wirtschaftlichen Notlage befinden, zugutekommen soll. In diesem Beitrag konzentriere ich mich auf Deutschland, unter anderem deshalb, weil es bisher den größten Anteil zur Stabilisierung der überschuldeten Länder in der Eurozone geleistet und damit einen erheblichen Einfluss auf die Entwicklung einer möglichen EU-Transfernunion hat.

This thesis consists of three distinct parts. Part I introduces the basic concepts and the notion of general quadratic term structures (GQTS) essential in some of the following chapters. Part II focuses on credit risk models and Part III studies forward price term structure models using both the classical and the geometrical approach.  Part I is organized as follows. Chapter 1 is divided in two main sections. The first section presents some of the fundamental concepts which are a pre-requisite to the papers that follow. All of the concepts and results are well known and hence the section can be regarded as an introduction to notation and the basic principles of arbitrage theory. The second part of the chapter is of a more technical nature and its purpose is to summarize some key results on point processes or differential geometry that will be used later in the thesis. For finite dimensional factor models, Chapter 2 studies GQTS. These term structures include, as special cases, the affine term structures and Gaussian quadratic term structures previously studied in the literature. We show, however, that there are other, non-Gaussian, quadratic term structures and derive sufficient conditions for the existence of these GQTS for zero-coupon bond prices. On Part II we focus on credit risk models.   In Chapter 3 we propose a reduced form model for default that allows us to derive closed-form solutions for all the key ingredients in credit risk modeling: risk-free bond prices, defaultable bond prices (with and without stochastic recovery) and survival probabilities. We show that all these quantities can be represented in general exponential quadratic forms, despite the fact that the intensity of default is allowed to jump producing shot-noise effects. In addition, we show how to price defaultable digital puts, CDSs and options on defaultable bonds. Further on, we study a model for portfolio credit risk that considers both firm-specific and systematic risk. The model generalizes the attempt of Duffie and Garleanu (2001). We find that the model produces realistic default correlation and clustering effects. Next, we show how to price CDOs, options on CDOs and how to incorporate the link to currently proposed credit indices. In Chapter 4 we start by presenting a reduced-form multiple default type of model and derive abstract results on the influence of a state variable $X$ on credit spreads when both the intensity and the loss quota distribution are driven by $X$. The aim is to apply the results to a real life situation, namely, to the influence of macroeconomic risks on the term structure of credit spreads. There is increasing support in the empirical literature for the proposition that both the probability of default (PD) and the loss given default (LGD) are correlated and driven by macroeconomic variables. Paradoxically, there has been very little effort, from the theoretical literature, to develop credit risk models that would take this into account. One explanation might be the additional complexity this leads to, even for the ``treatable'' default intensity models. The goal of this paper is to develop the theoretical framework necessary to deal with this situation and, through numerical simulation, understand the impact of macroeconomic factors on the term structure of credit spreads. In the proposed setup, periods of economic depression are both periods of higher default intensity and lower recovery, producing a business cycle effect. Furthermore, we allow for the possibility of an index volatility that depends negatively on the index level and show that, when we include this realistic feature, the impacts on the credit spread term structure are emphasized. Part III studies forward price term structure models. Forward prices differ from futures prices in stochastic interest rate settings and become an interesting object of study in their own right. Forward prices with different maturities are martingales under different forward measures. This mathematical property implies that the term structure of forward prices is always linked to the term structure of bond prices, and this dependence makes forward price term structure models relatively harder to handle. For finite dimensional factor models, Chapter 5 applies the concept of GQTS to the term structure of forward prices. We show how the forward price term structure equation depends on the term structure of bond prices. We then exploit this connection and show that even in quadratic short rate settings we can have affine term structures for forward prices. Finally, we show how the study of futures prices is naturally embedded in the study of forward prices, that the difference between the two term structures may be deterministic in some (non-trivial) stochastic interest rate settings. In Chapter 6 we study a fairly general Wiener driven model for the term structure of forward prices. The model, under a fixed martingale measure, $\Q$, is described by using two infinite dimensional stochastic differential equations (SDEs). The first system is a standard HJM model for (forward) interest rates, driven by a multidimensional Wiener process $W$. The second system is an infinite SDE for the term structure of forward prices on some specified underlying asset driven by the same $W$. Since the zero coupon bond volatilities will enter into the drift part of the SDE for these forward prices, the interest rate system is needed as input to the forward price system. Given this setup, we use the Lie algebra methodology of Bj\o rk et al. to investigate under what conditions, on the volatility structure of the forward prices and/or interest rates, the inherently (doubly) infinite dimensional SDE for forward prices can be realized by a finite dimensional Markovian state space model. / Diss. Stockholm : Handelshögskolan, 2006

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In diesem Beitrag frage ich [...], ob die Bürger Deutschlands den Einstieg der EU in die transnationale finanzielle Hilfe unterstützen, d.h. ob sie sich transnational fiskalpolitisch solidarisch zeigen. Unter transnationaler fiskalpolitischer Solidarität verstehe ich eine Zahlungsbereitschaft, die überschuldeten EU-Ländern, die sich in einer akuten wirtschaftlichen Notlage befinden, zugutekommen soll. In diesem Beitrag konzentriere ich mich auf Deutschland, unter anderem deshalb, weil es bisher den größten Anteil zur Stabilisierung der überschuldeten Länder in der Eurozone geleistet und damit einen erheblichen Einfluss auf die Entwicklung einer möglichen EU-Transfernunion hat.

The field of bankruptcy prediction has experienced a notable increase of interest in recent years. Machine Learning (ML) models have been an essential component of developing more sophisticated models. Previous studies within bankruptcy prediction have not evaluated how well ML techniques adopt for data sets of companies with higher credit risks. This study introduces a binary decision rule for identifying companies with higher credit risks (abnormal companies). Two categories of abnormal companies are explored based on the activity of: (1) abnormal credit risk analysis (”AC”, herein) and (2) abnormal payment remarks (”AP”, herein) among small Swedish limited companies. Companies not fulfilling the abnormality criteria are considered normal (”NL”, herein). The abnormal companies showed a significantly higher risk for future payment defaults than NL companies. Previous studies have mainly used financial features for bankruptcy prediction. This study evaluates the contribution of different feature categories: (1) financial, (2) qualitative, (3) performed credit risk analysis, and (4) payment remarks. Implementing a Light Gradient Boosting Machine (LightGBM), the study shows that bankruptcies are easiest to anticipate among abnormal companies compared to NL and all companies (full data set). LightGBM predicted bankruptcies with an average Area Under the Precision Recall Curve (AUCPR) of 45.92% and 61.97% for the AC and AP data sets, respectively. This performance is 6.13 - 27.65 percentage units higher compared to the AUCPR achieved on the NL and full data set. The SHapley Additive exPlanations (SHAP)-values indicate that financial features are the most critical category. However, qualitative features highly contribute to anticipating bankruptcies on the NL companies and the full data set. The features of performed credit risk analysis and payment remarks are primarily useful for the AC and AP data sets. Finally, the field of bankruptcy prediction is introduced to: (1) evaluate if bankruptcies among companies with other forms of credit risk can be anticipated with even higher predictive performance and (2) test if other qualitative features bring even better predictive performance to bankruptcy prediction. / Konkursklassificering har upplevt en anmärkningsvärd ökning av intresse de senaste åren. I denna utveckling har maskininlärningsmodeller utgjort en nyckelkompentent i utvecklingen mot mer sofistikerade modeller. Tidigare studier har inte utvärderat hur väl maskininlärningsmodeller kan appliceras för att förutspå konkurser bland företag med högre kreditrisk. Denna studie introducerar en teknik för att definiera företag med högre kreditrisk, det vill säga avvikande företag. Två olika kategorier av avvikande företag introduceras baserat på företagets aktivitet av: (1) kreditrisksanalyser på företaget (”AK”, hädanefter), samt (2) betalningsanmärkningar (”AM”, hädanefter) för små svenska aktiebolag. Företag som inte uppfyller kraven för att vara ett avvikande företag klassas som normala (”NL”, hädanefter). Studien utvärderar sedan hur väl konkurser kan förutspås för avvikande företag i relation till NL och alla företag. Tidigare studier har primärt utvärdera finansiella variabler för konkursförutsägelse. Denna studie utvärderar ett bredare spektrum av variabler: (1) finansiella, (2) kvalitativa, (3) kreditrisks analyser, samt (4) betalningsanmärkningar för konkursförutsägelse. Genom att implementera LightGBM finner studien att konkurser förutspås med högst noggrannhet bland AM företag. Modellen presenterar bättre för samtliga avvikande företag i jämförelse med både NL företag och för hela datasetet. LightGBM uppnår ett genomsnittligt AUC-PR om 45.92% och 61.97% för AK och AM dataseten. Dessa resultat är 6.13-27.65 procentenheter högre i jämförelse med det AUC-PR som uppnås för NL och hela datasetet. Genom att analysera modellens variabler med SHAP-värden visar studien att finansiella variabler är mest betydelsefulla för modells prestation. Kvalitativa variabler har däremot en stor betydelse för hur väl konkurser kan förutspås för NL företag samt alla företag. Variabelkategorierna som indikerar företagets historik av genomförda kreditrisksanalyser samt betalningsanmärkningar är primärt betydelsefulla för konkursklassificering av AK samt AM företag. Detta introducerar området av konkursförutsägelse till att: (1) undersöka om konkurser bland företag med andra kreditrisker kan förutspås med högre noggrannhet och (2) test om andra kvalitativa variabler ger bättre prediktive prestandard för konkursförutsägelse.

Die vorliegende Broschüre stellt einen Leitfaden durch den Prozess der Unternehmensfinanzierung dar und soll Ihnen helfen, sich optimal auf das Bankgespräch vorzubereiten.

The aim of this thesis is to visualize and explain how people’s economic and social relations were connected in the parish of Sundborn, in the south east of Dalarna, in the period 1820-1849. The study is based on records of claims and debts in inventories and parish registers, which enable reconstruction of the private local credit market. The study shows that the majority in the economic network lived in Sundborn, and that while few people had formal loans at the institutional credit market, many had loans by trust at the private local credit market. Also, while few people were lenders, almost everyone was a borrower. The most common credit relationship was between people who lived near one another, and people who lived near one another or were related received a higher average credit. The private local credit market consisted primarily of men. These results have been interpreted with the use of social network theory, it being shown that people depended on their social network to obtain the necessary credit. In creating an economic network graph, I show that households in the parish of Sundborn were interconnected by debt relations. By using this method, it is possible to identify significant persons and potential parish bankers. Through combining the network graph with a landscape map, I show connections between the settlement, the assets, economic relations, centrality and the long valley of Sundborn river. The study opens up possibilities for further development of the same method to visualize historic data and relate it to the landscape, with a view to generating new related questions and spatial analyses.

<p>Sammanfattning</p><p>Vi har undersökt hur kreditprocessen påverkas ur kredithandläggarens perspektiv, av att det kreditsökande småföretaget använder sig av en extern rådgivare eftersom tidigare forskning tyder på att det blivit svårare för dessa företag ett erhålla finansiering från banker. Ändringen i förmånsrättslagen 2004 är en bidragande faktor till småföretagens prekära situation eftersom det försämrade bankens utdelning vid en eventuell företagskonkurs. När en småföretagares kunskaper inte räcker till, kan en extern rådgivare konsulteras för vägledning i kreditprocessen. Vårt syfte med uppsatsen var att beskriva kredithandläggarnas uppfattning om den externa rådgivarens olika funktioner i kreditprocessen samt att analysera hur kreditprocessen påverkas av att en extern rådgivare agerar i småföretagets intresse. Vi har genom en kvalitativ undersökning och studerat fyra kredithandläggare i fyra olika banker med erfarenhet av vårt ställda problem och fångat deras respektive betraktelser. Resultaten pekar på att respondenterna upplever problemet på ett liknande sätt och våra huvudsakliga slutsatser har framkommit efter att vi studerat den externa rådgivarens olika funktioner i kreditprocessen. Konsultation av extern rådgivning innebär att kunskap tillförs i kreditprocessen vilket leder till att ett mer genomarbetat beslutsunderlag kan presenteras för banken. Vidare ger en extern rådgivare legitimitet åt kredithandläggarens beslutsunderlag och ökar därmed förtroendet för småföretaget vilket kan förbättra relationen mellan de två sistnämnda parterna. En risk har belysts för kredithandläggaren med att den externa rådgivaren undanhåller viktig information eftersom denne har ett egenintresse av att småföretaget beviljas krediten då det kan leda till ett fortsatt framtida samarbete dem emellan. </p><p>Abstract</p><p>We have investigated the effect on the credit process out of the creditor’s point of view, when a small business consults an external adviser since earlier research indicates that it has become more difficult for these businesses to provide capital from banks. The alteration in the Law of priority in debtor’s property on credits 2004 is a contributory cause to the small businesses precarious situation since it deteriorated banks dividends in a possible liquidation. If a small businessman’s knowledge doesn’t ad up, an external adviser can be consulted as guidance in the credit process. Our purposes with this essay were to describe the creditor’s opinion regarding the external adviser’s different functions in the credit process and to analyze the effect on the credit process when an external adviser acts in the small business interest. Through a qualitative investigation we have studied four creditors in four different banks with experience from our named problem and captured their respective reflections. The result indicates that our creditors experience the problem in a similar way and our main conclusions have emerged by studying the external adviser’s different functions in the credit process. Consultation of an external adviser represents that knowledge provides the credit process which lead up to more thoroughly decision-making data to present for the bank. An external adviser also concedes legitimacy towards the creditor’s decision-making data and increases thereby the confidence towards the small business which can improve the relation between the two last mentioned parties. A risk have become elucidated for the creditor which means that the external adviser withhold important information due to ones own interest that the small business gets granted the credit since it can lead to a continuous future collaboration between them.</p>

Sammanfattning Vi har undersökt hur kreditprocessen påverkas ur kredithandläggarens perspektiv, av att det kreditsökande småföretaget använder sig av en extern rådgivare eftersom tidigare forskning tyder på att det blivit svårare för dessa företag ett erhålla finansiering från banker. Ändringen i förmånsrättslagen 2004 är en bidragande faktor till småföretagens prekära situation eftersom det försämrade bankens utdelning vid en eventuell företagskonkurs. När en småföretagares kunskaper inte räcker till, kan en extern rådgivare konsulteras för vägledning i kreditprocessen. Vårt syfte med uppsatsen var att beskriva kredithandläggarnas uppfattning om den externa rådgivarens olika funktioner i kreditprocessen samt att analysera hur kreditprocessen påverkas av att en extern rådgivare agerar i småföretagets intresse. Vi har genom en kvalitativ undersökning och studerat fyra kredithandläggare i fyra olika banker med erfarenhet av vårt ställda problem och fångat deras respektive betraktelser. Resultaten pekar på att respondenterna upplever problemet på ett liknande sätt och våra huvudsakliga slutsatser har framkommit efter att vi studerat den externa rådgivarens olika funktioner i kreditprocessen. Konsultation av extern rådgivning innebär att kunskap tillförs i kreditprocessen vilket leder till att ett mer genomarbetat beslutsunderlag kan presenteras för banken. Vidare ger en extern rådgivare legitimitet åt kredithandläggarens beslutsunderlag och ökar därmed förtroendet för småföretaget vilket kan förbättra relationen mellan de två sistnämnda parterna. En risk har belysts för kredithandläggaren med att den externa rådgivaren undanhåller viktig information eftersom denne har ett egenintresse av att småföretaget beviljas krediten då det kan leda till ett fortsatt framtida samarbete dem emellan. Abstract We have investigated the effect on the credit process out of the creditor’s point of view, when a small business consults an external adviser since earlier research indicates that it has become more difficult for these businesses to provide capital from banks. The alteration in the Law of priority in debtor’s property on credits 2004 is a contributory cause to the small businesses precarious situation since it deteriorated banks dividends in a possible liquidation. If a small businessman’s knowledge doesn’t ad up, an external adviser can be consulted as guidance in the credit process. Our purposes with this essay were to describe the creditor’s opinion regarding the external adviser’s different functions in the credit process and to analyze the effect on the credit process when an external adviser acts in the small business interest. Through a qualitative investigation we have studied four creditors in four different banks with experience from our named problem and captured their respective reflections. The result indicates that our creditors experience the problem in a similar way and our main conclusions have emerged by studying the external adviser’s different functions in the credit process. Consultation of an external adviser represents that knowledge provides the credit process which lead up to more thoroughly decision-making data to present for the bank. An external adviser also concedes legitimacy towards the creditor’s decision-making data and increases thereby the confidence towards the small business which can improve the relation between the two last mentioned parties. A risk have become elucidated for the creditor which means that the external adviser withhold important information due to ones own interest that the small business gets granted the credit since it can lead to a continuous future collaboration between them.