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Three Essays on Structural Credit Risk Modelling

Author: Radoslav Zahariev
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

Book Description

Three Essays on Structural Credit Risk Modelling

Author: Radoslav Zahariev
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

Book Description

Three Essays in the Theory of Credit Risk

Author: Clemens Mueller
Publisher:
ISBN:
Category :
Languages : en
Pages : 208

Book Description

Three Essays on Credit Risk, Fixed Income and Derivatives

Author: Redouane Elkamhi
Publisher:
ISBN:
Category : Credit
Languages : en
Pages : 179

Book Description

Three Essays in Credit Risk

Author: Mirela Raluca Predescu Vasvari
Publisher:
ISBN: 9780494219478
Category : Dissertations, Academic
Languages : en
Pages : 234

Book Description
This thesis consists of three essays in credit risk. The first essay examines the relationship between credit default swap (CDS) spreads and bond yields as well as the relationship between CDS spreads and credit rating announcements. We test the no-arbitrage theoretical relationship between CDS spreads and bond yields and reach conclusions on the benchmark risk-free rate used by participants in the credit derivatives market. We then carry out a series of tests to explore the extent to which credit rating announcements by Moody's are anticipated by participants in the credit default swap market. The third essay extends the 1976 Black and Cox structural model in order to value correlation-dependent credit derivatives. The proposed model assumes that the correlations between the assets of the obligors are determined by one or more common factors. We first implement a base case model where the asset correlations and recovery rates are constant. We compare our model with the widely used Gaussian copula model of survival time and test how well our model fits market prices of CDO tranches. We then consider two extensions of the base case model. One reflects empirical research showing that default correlations are positively dependent on default rates. The other reflects empirical research showing that recovery rates are negatively dependent on default rates. The second essay investigates the performance of structural models of credit risk along two dimensions. First, I analyze the models' ability to explain CDS spreads. I find that the pricing accuracy of structural models depends heavily on the market information set used in the estimation. Incorporating past time series of CDS spreads in addition to equity and balance sheet information improves the out-of-sample model pricing performance by 50%. Second, I investigate the incremental value of structural models above and beyond CDS spreads in predicting credit ratings migrations. I find evidence that three-month changes in the Distance to Default (DD) have incremental value for anticipating rating downgrades over and above changes in CDS spreads. However, this is not the case for one-month changes in DD.

Three Essays on Credit Risk Modeling

Author: Xiaopeng Zhang
Publisher:
ISBN:
Category : Credit
Languages : en
Pages : 442

Book Description

Three Essays on Sovereign Credit Risk

Author: Tingwei Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 152

Book Description
This thesis studies sovereign credit risk and its impact on banks and industrial firms. The first essay shows that bank credit risk is linked to sovereign credit risk through common exposure to systemic risk instead of implicit bailout or excessive holding of home country bonds. In the second essay, I build a trade-off model of capital structure which predicts negative correlation between optimal leverage of big firms and sovereign credit risk due to implicit bailout. The model prediction is confirmed by empirical evidence from firms in the euro area. The third essay provides a joint pricing model of CDS and bond to disentangle the default and liquidity component in CDS spread and bond yield spread. I find a remarkable liquidity component in the CDS spreads of peripheral euro area countries and conclude that ignoring CDS illiquidity leads to overestimation of default component in bond yield.