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Author: James H. Dignan Publisher: ISBN: Category : Languages : en Pages :
Book Description
Traditionally, attempts at decomposing the spread between risk-free debt and corporate debt has focused exclusively on default risk. This focus continues despite the fact that the data indicate that the required spreads for higher-rated corporate bonds are normally far smaller than the spreads available in the market. This article challenges the traditional notion of an quot;excess spreadquot; and, instead, attributes the additional spread to non-default-related factors, such as liquidity and spread volatility. The costs associated with both liquidity and spread volatility are examined and a framework is provided for the investor to calculate adequate compensation for such costs.
Author: James H. Dignan Publisher: ISBN: Category : Languages : en Pages :
Book Description
Traditionally, attempts at decomposing the spread between risk-free debt and corporate debt has focused exclusively on default risk. This focus continues despite the fact that the data indicate that the required spreads for higher-rated corporate bonds are normally far smaller than the spreads available in the market. This article challenges the traditional notion of an quot;excess spreadquot; and, instead, attributes the additional spread to non-default-related factors, such as liquidity and spread volatility. The costs associated with both liquidity and spread volatility are examined and a framework is provided for the investor to calculate adequate compensation for such costs.
Author: Song Han Publisher: ISBN: Category : Languages : en Pages : 52
Book Description
We examine the relationship between the nondefault component of corporate bond spreads and bond liquidity measures constructed from intraday transactions data, with the default component controlled by the term structure of credit default swaps (CDS) spreads. In doing so, we address both maturity mismatch and coupon effects in the nondefault spreads estimation, and explicitly control for the unobservable firm heterogeneity to identify the liquidity effects through variations both over time and across bonds issued by the same firm. We find a clear positive significant relationship between bond illiquidity and nondefault bond spreads. These liquidity effects identify a unique component of nondefault bond spreads that is uncorrelated with conventional liquidity proxy variables, particularly for higher-rated investment-grade bonds. Furthermore, nondefault bond spreads are relatively high at the short end of the maturity and increase with bond age. The effects of transaction-based bond liquidity measures are robust to alternative model specifications and samplings, and to whether swap or Treasury yield is used as risk-free rate.
Author: Niklas Wagner Publisher: CRC Press ISBN: 1584889950 Category : Business & Economics Languages : en Pages : 600
Book Description
Featuring contributions from leading international academics and practitioners, Credit Risk: Models, Derivatives, and Management illustrates how a risk management system can be implemented through an understanding of portfolio credit risks, a set of suitable models, and the derivation of reliable empirical results. Divided into six sectio
Author: Ramaprasad Bhar Publisher: World Scientific ISBN: 9814464988 Category : Business & Economics Languages : en Pages : 354
Book Description
This book provides a comprehensive account of stochastic filtering as a modeling tool in finance and economics. It aims to present this very important tool with a view to making it more popular among researchers in the disciplines of finance and economics. It is not intended to give a complete mathematical treatment of different stochastic filtering approaches, but rather to describe them in simple terms and illustrate their application with real historical data for problems normally encountered in these disciplines. Beyond laying out the steps to be implemented, the steps are demonstrated in the context of different market segments. Although no prior knowledge in this area is required, the reader is expected to have knowledge of probability theory as well as a general mathematical aptitude.Its simple presentation of complex algorithms required to solve modeling problems in increasingly sophisticated financial markets makes this book particularly valuable as a reference for graduate students and researchers interested in the field. Furthermore, it analyses the model estimation results in the context of the market and contrasts these with contemporary research publications. It is also suitable for use as a text for graduate level courses on stochastic modeling.
Author: Giovanni Barone-Adesi Publisher: Springer ISBN: 1137564865 Category : Business & Economics Languages : en Pages : 137
Book Description
Where institutions and individuals averagely invest the majority of their assets in money-market and fixed-income instruments, interest rate risk management could be seen as the single most important global financial issue. However, the majority of the key techniques used by most investors were developed several decades ago, and the advantages of multi-factor models are not fully recognised by many researchers and practitioners. This book provides clear and practical insight into bond portfolios and portfolio management through key empirical analysis. The authors use extensive sets of empirical data to describe the value potentially added by more recent techniques to manage interest rate risk relative to traditional techniques and to present empirical evidence of such an added value. Beginning with a description of the simplest models and moving on to the most complex, the authors offer key recommendations for the future of rate risk management.
Author: Uğur N. Küçük Publisher: ISBN: Category : Languages : en Pages :
Book Description
In this paper, I show that a sizable component of emerging market sovereign yield spreads is due to factors other than default risk such as liquidity. I estimate the non-default component of the yield spreads as the basis between the actual credit default swap (CDS) premium and the hypothetical CDS premium implied by emerging market bond yields. On average, the basis is large and positive for speculative grade bonds and slightly negative for investment grade bonds. This large positive basis for speculative grade bonds support the existence of speculation in the CDS market when the underlying's credit quality is bad. I study the effects of bond liquidity, liquidity in the CDS market, equity market performance and macroeconomic variables on the non-default component of the emerging market yield spreads. I show that bond liquidity has a significant and positive effect on the CDS-bond basis of investment grade bonds. The results suggest that the liquid bonds of investment grade bonds are more expensive relative to the prices implied their CDS premiums. However, the results are somewhat mixed and even contrary for the speculative grade bond sample.
Author: Jochen Andritzky Publisher: Springer Science & Business Media ISBN: 3540374493 Category : Business & Economics Languages : en Pages : 261
Book Description
Past cycles of sovereign lending and default suggest that debt crises will recur at some point. This book shows why investors should reckon with similar credit events in the future. Surveying the sovereign bond market, the author provides investors with a useful toolkit for analyzing sovereign bonds and foreseeing trends in the international financial architecture. The result should be a better understanding of debt crises and more deliberate investment decisions.
Author: Nikiforos T. Laopodis Publisher: Taylor & Francis ISBN: 1000506053 Category : Business & Economics Languages : en Pages : 767
Book Description
Financial Economics and Econometrics provides an overview of the core topics in theoretical and empirical finance, with an emphasis on applications and interpreting results. Structured in five parts, the book covers financial data and univariate models; asset returns; interest rates, yields and spreads; volatility and correlation; and corporate finance and policy. Each chapter begins with a theory in financial economics, followed by econometric methodologies which have been used to explore the theory. Next, the chapter presents empirical evidence and discusses seminal papers on the topic. Boxes offer insights on how an idea can be applied to other disciplines such as management, marketing and medicine, showing the relevance of the material beyond finance. Readers are supported with plenty of worked examples and intuitive explanations throughout the book, while key takeaways, ‘test your knowledge’ and ‘test your intuition’ features at the end of each chapter also aid student learning. Digital supplements including PowerPoint slides, computer codes supplements, an Instructor’s Manual and Solutions Manual are available for instructors. This textbook is suitable for upper-level undergraduate and graduate courses on financial economics, financial econometrics, empirical finance and related quantitative areas.
Author: James H. Dignan
Author: James H. Dignan
Author: Song Han
Author: Song Han
Author: Niklas Wagner
Author: Ramaprasad Bhar
Author: Giovanni Barone-Adesi
Author: Uğur N. Küçük
Author: Jochen Andritzky
Author: Nikiforos T. Laopodis
Author: Yakov Amihud