Author: Jing-Zhi Huang Publisher: ISBN: Category : Languages : en Pages :
Book Description
We examine the question of the determinants of corporate bond credit spreads using both weekly and monthly option-adjusted spreads for nine corporate bond indices from Merrill Lynch from January 1997 to July 2002. We find that the Russell 2000 index historical return volatility and Conference Board composite leading and coincident economic indicators have significant power in explaining credit spread changes, especially for high yield indices. Furthermore, these three variables plus the interest rate level, the historical interest rate volatility, the yield curve slope, the Russell 2000 index return, and the Fama-French [1996] high-minus-low factor can explain more than 40% of credit spread changes for five bond indexes. In particular, these eight variables can explain 67.68% and 60.82% of credit spread changes for the B- and BB rated indexes, respectively. Our analysis confirms that credit spread changes for high-yield bonds are more closely related to equity market factors and also provides evidence in favor of incorporating macroeconomic factors into credit risk models.
Author: Doron Avramov Publisher: ISBN: Category : Languages : en Pages :
Book Description
New evidence is reported on the empirical success of structural models in explaining changes in corporate credit risk. A parsimonious set of common factors and company-level fundamentals, inspired by structural models, was found to explain more than 54 percent (67 percent) of the variation in credit-spread changes for medium-grade (low-grade) bonds. No dominant latent factor was present in the unexplained variation. Although this set of factors had lower explanatory power among high-grade bonds, it did capture most of the systematic variation in credit-spread changes in that category. It also subsumed the explanatory power of the Fama and French factors among all grade classes.
Author: Zhiguo He Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Two intermediary-based factors - a broad financial distress measure and a dealer corporate bond inventory measure - explain about 50% of the puzzling common variation of credit spread changes beyond canonical structural factors. A simple model, in which intermediaries facing margin constraints absorb supply of assets from customers, accounts for the documented explanatory power and delivers further implications with empirical support.
Author: Freeman Publications Publisher: ISBN: Category : Languages : en Pages : 132
Book Description
What if you could get an extra $100, $200 or even $500 deposited directly into your brokerage account within the next 24 hours? That might sound impossible... but with credit spreads... it's not just a possibility... it's a certainty. Because with credit spreads, every single trade pays you when you enter it. And you can use these to generate safe returns, no matter what happens to your stock. Unlike regular options trading, you don't even need to guess the direction of a stock, or what price it will be in a month. You only have to guess a price range. And you can use this strategy to generate income on stocks you don't even own... even if those stocks are moving sideways. Plus by focusing on only the most reliable moves - you can win as often as 85 times out of every 100 trades - which means you pile up profits that others can only dream about! All of this without paying a "trading guru" thousands of dollars to learn their system. Here's just a fraction of what you'll learn inside the book: The 8 criteria we use to select the best stocks to write credit spreads - Page 85 The vital difference between naked and uncovered calls - Page 55 10 examples of stock you should never use to trade credit spreads. Amateurs do this all the time and you can lose as much as $31,000 on a single trade. Learn why these stocks are so dangerous and what to do instead - Page 86 How to automatically set up take profit levels so you only have to spend a couple minutes each month managing your trades - Page 104 Options Greeks explained in 10 minutes - Page 44 Exactly what level the VIX should be at before you sell a spread. A backtest implementing this one tweak made the strategy 50% more profitable over 10 years worth of trades - Page 96 A simple strategy for selecting the right strike price for your options - Page 160 The only 3 technical indicators you need to know for credit spreads. Ignore everything else, you only need these 3 beginner friendly metrics to get started - Page 70 No strategy is risk-free, but on page 101 we show you how to set up your trades to avoid any big losses How to find the best credit spreads stocks for free. Stock scanning services will charge you $300 a year for this information, but our approach costs nothing and lists the exact same companies - Page 81 Plus, inside the book you get free access to a 7 part video course covering every aspect of profitable investing So even if you've never used options before, the book walks you through everything step by step. You'll find everything explained in plain English, free from technical jargon. Even if you get stuck, you can always send us an email (provided inside the book) or reach out in our private investing community on social media - we're always happy to help with any questions you might have. And remember... bank CD's will only pay you between 0% and 1%... the dividend yield on the S&P 500 is around 2%... and 5 to 10 year municipal bonds will only pay between 2% and 3%. But if you use what's inside this book, you could have the opportunity to earn so much more than that. And when you receive just a single premium from one of these trades (which is paid into your account instantly) it will cover the cost of this book 10x over. To get your copy right now, just scroll up and click "add to cart"
Author: Darrell Duffie Publisher: Princeton University Press ISBN: 1400829208 Category : Business & Economics Languages : en Pages : 488
Book Description
This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing results are based on the three increasingly restrictive assumptions: absence of arbitrage, single-agent optimality, and equilibrium. These results are unified with two key concepts, state prices and martingales. Technicalities are given relatively little emphasis, so as to draw connections between these concepts and to make plain the similarities between discrete and continuous-time models. Readers will be particularly intrigued by this latest edition's most significant new feature: a chapter on corporate securities that offers alternative approaches to the valuation of corporate debt. Also, while much of the continuous-time portion of the theory is based on Brownian motion, this third edition introduces jumps--for example, those associated with Poisson arrivals--in order to accommodate surprise events such as bond defaults. Applications include term-structure models, derivative valuation, and hedging methods. Numerical methods covered include Monte Carlo simulation and finite-difference solutions for partial differential equations. Each chapter provides extensive problem exercises and notes to the literature. A system of appendixes reviews the necessary mathematical concepts. And references have been updated throughout. With this new edition, Dynamic Asset Pricing Theory remains at the head of the field.
Author: Pierre Collin-Dufresne Publisher: ISBN: Category : Languages : en Pages : 33
Book Description
Using straight industrial bonds with quoted prices, we investigate the determinants of credit spread changes. We find the variables that should in theory determine credit spread changes in fact have limited explanatory power. Further, the residuals from this first-pass regression are highly cross-correlated, and principal components analysis strongly suggests they are driven by a single common factor. We investigate several macro-economic and financial variables as candidate proxies for this factor. We cannot, however, find any set of variables which explain this common systematic factor. Our results suggest the corporate bond market is a segmented market driven by corporate bond specific supply/demand shocks.
Author: Viorel Roscovan Publisher: ISBN: Category : Languages : en Pages : 56
Book Description
Recent research on default risk has shown that most of the variation in credit spreads is driven by a common yet unidentifiable factor. I find that bond turnover explains up to 11% of this variation. Using the implications of an intertemporal capital asset pricing model, I construct a bond hedging portfolio from TRACE transactions data and relate its return to changes in credit spreads. In theory, this portfolio captures the dynamic risk of the economy and, hence, hedges the risk of changes in market conditions. My findings are as follows. First, credit spreads relate asymmetrically to the return on the bond hedging portfolio. When market conditions are risky, the return on the bond hedging portfolio is positive and credit spreads increase significantly. During unchanged or less risky market conditions, the return on the bond hedging portfolio is small or negative, and credit spreads are less sensitive. Second, on average, credit spreads do not relate to a similar hedging portfolio constructed from equity volume data. The return on the stock hedging portfolio, however, captures some variation in credit spreads for riskier bond classes. Third, in contrast to the results for equity markets, where stock returns and volume are weakly related, this paper finds a strong link between volume and credit spreads in corporate bond markets.
Author: Christopher Hessel Publisher: ISBN: Category : Languages : en Pages : 23
Book Description
This paper investigates the change of the credit spread volatility from 1993 to 2001. We find that credit spreads between junk grade corporate bonds and Treasury bond are significantly more volatile in the second half of this period when credit related securities become popular. However credit spreads between investment-grade corporate debt and Treasury are not significantly more volatile. For the period prior to the introduction of credit related securities, credit spread changes followed mean reverting processes. In the period with rapid growth of these new products, the credit spread changes shifted toward random walk processes. The loss of the mean reverting process with the advent of the new securities is consistent with increased market efficiency.
Author: Jing-Zhi Huang
Author: Doron Avramov
Author: Zhiguo He
Author: Freeman Publications
Author: Darrell Duffie
Author: Pierre Collin-Dufresne
Author: Yibin Zhang
Author: Pierre Collin Dufresne
Author: Viorel Roscovan
Author: Christopher Hessel