Download or read book Moral Hazard with Rating Agency written by Bappaditya Mukhopadhyay and published by . This book was released on 2003 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we address the issue of possible moral hazard that rating agencies might have. We discuss the feasibility of possible incentive contracts that can ameliorate this problem. We find, that incentive payments to the rating agency based on expected returns on debt will do away with the moral hazard problem.

Download or read book The Rating Agencies and Their Credit Ratings written by Herwig Langohr and published by John Wiley & Sons. This book was released on 2010-04-01 with total page 524 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit rating agencies play a critical role in capital markets, guiding the asset allocation of institutional investors as private capital moves freely around the world in search of the best trade-off between risk and return. However, they have also been strongly criticised for failing to spot the Asian crisis in the early 1990s, the Enron, WorldCom and Parmalat collapses in the early 2000s and finally for their ratings of subprime-related structured finance instruments and their role in the current financial crisis. This book is a guide to ratings, the ratings industry and the mechanics and economics of obtaining a rating. It sheds light on the role that the agencies play in the international financial markets. It avoids the sensationalist approach often associated with studies of rating scandals and the financial crisis, and instead provides an objective and critical analysis of the business of ratings. The book will be of practical use to any individual who has to deal with ratings and the ratings industry in their day-to-day job. Reviews "Rating agencies fulfil an important role in the capital markets, but given their power, they are frequently the object of criticism. Some of it is justified but most of it portrays a lack of understanding of their business. In their book The Rating Agencies and their Credit Ratings, Herwig and Patricia Langohr provide an excellent economic background to the role of rating agencies and also a thorough understanding of their business and the problems they face. I recommend this book to all those who have an interest in this somewhat arcane but extremely important area." -Robin Monro-Davies, Former CEO, Fitch Ratings. "At a time of unprecedented public and political scrutiny of the effectiveness and indeed the basic business model of the Credit Rating industry, and heightened concerns regarding the transparency and accountability of the leading agencies, this book provides a commendably comprehensive overview, and should provide invaluable assistance in the ongoing debate." -Rupert Atkinson, Managing Director, Head of Credit Advisory Group, Morgan Stanley and member of the SIFMA Rating Agency Task Force "The Langohrs have provided useful information in a field where one frequently finds only opinions or misconceptions. They supply a firm base from which to understand changes now underway. A well-read copy of this monograph should be close to the desk of every investor, issuer and financial regulator, legislator or commentator." -John Grout, Policy and Technical Director, The Association of Corporate Treasurers

Download or read book Moral Hazard Skin in the Game Regulation and Rating Quality written by Saltuk Ozerturk and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper theoretically investigates the implications of the "skin in the game" requirements in the Dodd-Frank Act for the rating accuracy of a credit rating agency (CRA). An issuer solicits a rating from a CRA to sell a loan portfolio. The sale is subject to a retention requirement to mitigate a moral hazard problem on the issuer's side. The CRA's optimal rating accuracy is shown to be increasing in the skin that the issuer is required to retain. The analysis relates the optimal retention requirement to the specifics of the CRA's information acquisition problem. The results suggest that the issuers should be required to retain more skin in complex financial securities. Furthermore, the planned introduction of liability rules for CRAs should be accompanied with a reduction in the retention requirements.

Download or read book Moral Hazard written by Juan Flores Zendejas and published by Routledge. This book was released on 2021-12-30 with total page 167 pages. Available in PDF, EPUB and Kindle. Book excerpt: Moral Hazard is a core concept in economics. In a nutshell, moral hazard reflects the reduced incentive to protect against risk where an entity is (or believes it will be) protected from its consequences, whether through an insurance arrangement or an implicit or explicit guarantee system. It is fundamentally driven by information asymmetry, arises in all sectors of the economy, including banking, medical insurance, financial insurance, and governmental support, undermines the stability of our economic systems and has burdened taxpayers in all developed countries, resulting in significant costs to the community. Despite the seriousness and pervasiveness of moral hazard, policymakers and scholars have failed to address this issue. This book fills this gap. It covers 200 years of moral hazard: from its origins in the 19th century to the bailouts announced in the aftermath of the COVID-19 outbreak. The book is divided into three parts. Part I deals with the ethics and other fundamental issues connected to moral hazard. Part II provides historical and empirical evidence on moral hazard in international finance. It examines in turn the role of the export credit industry, the international lender of last resort, and the IMF. Finally, Part III examines specific sectors such as automobile, banking, and the US industry at large. This is the first book to provide an interdisciplinary analysis of moral hazard and explain why addressing this issue has become crucial today. As such, it will attract interest from scholars across different fields, including economists, political scientists and lawyers.

Download or read book Moral Hazard in Health Insurance written by Amy Finkelstein and published by Columbia University Press. This book was released on 2014-12-02 with total page 161 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the challenge of covering heath care expenses—while minimizing economic risks. Moral hazard—the tendency to change behavior when the cost of that behavior will be borne by others—is a particularly tricky question when considering health care. Kenneth J. Arrow’s seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of moral hazard for health care, and Amy Finkelstein—recognized as one of the world’s foremost experts on the topic—here examines this issue in the context of contemporary American health care policy. Drawing on research from both the original RAND Health Insurance Experiment and her own research, including a 2008 Health Insurance Experiment in Oregon, Finkelstein presents compelling evidence that health insurance does indeed affect medical spending and encourages policy solutions that acknowledge and account for this. The volume also features commentaries and insights from other renowned economists, including an introduction by Joseph P. Newhouse that provides context for the discussion, a commentary from Jonathan Gruber that considers provider-side moral hazard, and reflections from Joseph E. Stiglitz and Kenneth J. Arrow. “Reads like a fireside chat among a group of distinguished, articulate health economists.” —Choice

Download or read book Moral Hazard written by Fouad Sabry and published by One Billion Knowledgeable. This book was released on 2024-02-03 with total page 579 pages. Available in PDF, EPUB and Kindle. Book excerpt: What is Moral Hazard The term "moral hazard" refers to a circumstance that occurs in the field of economics and describes a situation in which an economic actor has an incentive to expand its exposure to risk because it does not face the full costs of that risk. As an illustration, when a company is insured, it may be willing to take on additional risk since it is aware that its insurance will cover the costs connected with the risk. It is possible for a moral hazard to take place when, after a financial transaction has taken place, the actions of the party that is taking the risk change in a way that is detrimental to the party that is suffering the costs. How you will benefit (I) Insights, and validations about the following topics: Chapter 1: Moral hazard Chapter 2: Economic bubble Chapter 3: Debt Chapter 4: Contract theory Chapter 5: Adverse selection Chapter 6: Information asymmetry Chapter 7: Savings and loan crisis Chapter 8: Asset-backed security Chapter 9: Mortgage loan Chapter 10: Subprime mortgage crisis Chapter 11: Flight-to-quality Chapter 12: Subordinated debt Chapter 13: Subprime crisis impact timeline Chapter 14: Credit crunch Chapter 15: Subprime crisis background information Chapter 16: Interbank lending market Chapter 17: Government policies and the subprime mortgage crisis Chapter 18: Subprime mortgage crisis solutions debate Chapter 19: Securitization Chapter 20: Financial fragility Chapter 21: 2007-2008 financial crisis (II) Answering the public top questions about moral hazard. (III) Real world examples for the usage of moral hazard in many fields. Who this book is for Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Moral Hazard.

Download or read book Allocation Information and Markets written by John Eatwell and published by Springer. This book was released on 1989-09-21 with total page 321 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is an extract from the 4-volume dictionary of economics, a reference book which aims to define the subject of economics today. 1300 subject entries in the complete work cover the broad themes of economic theory. This volume concentrates on the topic of allocation information and markets.

Download or read book Reactive Risk and Rational Action written by Carol Anne Heimer and published by Univ of California Press. This book was released on 1985-01-01 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Economics of Credit Rating Agencies written by Amadeus Gabriel and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis explores the question of how credit rating agencies became financial market authorities and studies subsequently their contribution to the current financial crisis. The prerequisites for the growth of the credit rating industry have been set by government officials. Governments and similar institutions not only attributed ''regulatory'' licenses to credit rating agencies, thereby creating an income guarantee, but they are also the most important driver of the explosion in securities which require a rating. Credit rating agencies became financial market authorities because governments and policy-makers were in favor of it. International and domestic regulatory authorities created incentives to purchase sovereign debt, either directly or indirectly via the use of credit ratings. Financial regulations incentivized banks to hold large amounts of highly rated debts, i.e. government obligations until the occurrence of structured finance. These conditions significantly reduced the cost of debt for the banking sector through lower equity and provided more favorable refinancing costs for governments despite their high debt levels. However, the main reason for the financial fragility is monetary policy. Fractional-reserve banking and fiat money at a global scale since the 1970s increased moral hazard and excessive risk-taking in financial markets. Taking these factors into account, this thesis studies the role of credit rating agencies in the current financial crisis and sketches practical implications for the rating industry based on the findings of the work at hand.

Download or read book The Economics of Credit Rating Agencies written by Francesco Sangiorgi and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Economics of Credit Rating Agencies explores the economic and regulatory issues and frictions associated with credit rating agencies in the aftermath of the financial crisis. While ratings and other public signals are important, they can discourage independent due diligence and be a source of systemic risk. The authors highlight the diverse underlying views towards these competing approaches to reducing systemic risk and discuss the subtle contrasts between credit rating agencies and other types of due diligence providers, such as auditors, analysts and proxy-voting advisors. After an introduction, Section 2 provides a broad discussion of ratings in the regulatory framework, as well as how ratings potentially crowd out private information production and the risks associated with overreliance on ratings in market pricing. Section 3 contrasts credit rating agencies with alternative gatekeepers, such as auditors, analysts and proxy-voting advisers. Section 4 describes the difficulty of selling information and the underpinnings of the payment model for various financial information intermediaries under alternative assumptions. Section 5 discusses of rating agency analyst conflict of interest. An important aspect of credit ratings is the feedback effect that arises when a firm's behavior responds to the change in the cost of funding that is influenced by the rating. Feedback effects arise because of contractual triggers, but also through coordination and learning channels. Section 6 discusses these channels and especially the learning channel. Section 7 discusses selection issues including rating shopping and the contrast between solicited and unsolicited credit ratings. Section 8 contrasts ratings across products, including sovereign debt, and rating agencies. The nature of competition and the role of entry and reputation in the credit rating agency space are explored in Section 9. Section 10 examines why ratings matter, as well as techniques for identifying the real effects of ratings. The authors provide concluding observations and takeaways about rating agencies that emerged as a byproduct of the financial crisis in Section 11.

Download or read book Rating the Rating Agencies written by Mr.Amadou N. R. Sy and published by International Monetary Fund. This book was released on 2003-06-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: In contrast to the early-warning system literature, we find that currency and debt crises are not closely linked in emerging markets. We find that after 1994, credit ratings predict debt crises but fail to anticipate currency crises. When debt crises are defined as sovereign distress-when spreads are higher than 1,000 basis points-we find that countries experience reduced capital market access and high interest rates on their external debt for typically more than two quarters. We also find that lagged ratings and ratings changes, including negative outlooks and credit watches, anticipate such debt crises.

Download or read book Ranking Agencies Under Moral Hazard written by Edward Henry Robbins and published by . This book was released on 1995 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Rating Agencies and Their Credit Ratings written by Herwig M. Langohr and published by John Wiley & Sons. This book was released on 2008 with total page 662 pages. Available in PDF, EPUB and Kindle. Book excerpt: This title is a guide to ratings, the ratings industry, and the mechanics and economics of obtaining a rating. It sheds light on the role that the agencies play in the international financial markets.

Download or read book Moral Hazard and Experience Rating an Empirical Analysis written by Boyer, Marcel and published by Montréal : Université de Montréal, Centre de recherche sur les transports. This book was released on 1986 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Cambridge Handbook of Compliance written by Benjamin van Rooij and published by Cambridge University Press. This book was released on 2021-05-20 with total page 1559 pages. Available in PDF, EPUB and Kindle. Book excerpt: Compliance has become key to our contemporary markets, societies, and modes of governance across a variety of public and private domains. While this has stimulated a rich body of empirical and practical expertise on compliance, thus far, there has been no comprehensive understanding of what compliance is or how it influences various fields and sectors. The academic knowledge of compliance has remained siloed along different disciplinary domains, regulatory and legal spheres, and mechanisms and interventions. This handbook bridges these divides to provide the first one-stop overview of what compliance is, how we can best study it, and the core mechanisms that shape it. Written by leading experts, chapters offer perspectives from across law, regulatory studies, management science, criminology, economics, sociology, and psychology. This volume is the definitive and comprehensive account of compliance.

Download or read book Encyclopedia of Health Economics written by and published by Newnes. This book was released on 2014-02-21 with total page 1663 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Encyclopedia of Health Economics offers students, researchers and policymakers objective and detailed empirical analysis and clear reviews of current theories and polices. It helps practitioners such as health care managers and planners by providing accessible overviews into the broad field of health economics, including the economics of designing health service finance and delivery and the economics of public and population health. This encyclopedia provides an organized overview of this diverse field, providing one trusted source for up-to-date research and analysis of this highly charged and fast-moving subject area. Features research-driven articles that are objective, better-crafted, and more detailed than is currently available in journals and handbooks Combines insights and scholarship across the breadth of health economics, where theory and empirical work increasingly come from non-economists Provides overviews of key policies, theories and programs in easy-to-understand language

Download or read book Ratings Rating Agencies and the Global Financial System written by Richard M. Levich and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.