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Author: Verena Anna Berger Publisher: Springer ISBN: 365820219X Category : Business & Economics Languages : en Pages : 94
Book Description
Verena Anna Berger investigates the question to what extent credit default swap spreads are impacted by an increase of government bond yields within the European area. In the first step, these spreads are computed with the help of the Hull-White model to demonstrate the theoretical calculation. The main findings which are calculated by using the Fontana-Scheicher model show that a negative impact on credit default swap spreads is observed based on the analysed data. However, there is high variation between the analysed countries so that a country-specific evaluation instead of a general review is recommended by the author.
Author: Verena Anna Berger Publisher: Springer ISBN: 365820219X Category : Business & Economics Languages : en Pages : 94
Book Description
Verena Anna Berger investigates the question to what extent credit default swap spreads are impacted by an increase of government bond yields within the European area. In the first step, these spreads are computed with the help of the Hull-White model to demonstrate the theoretical calculation. The main findings which are calculated by using the Fontana-Scheicher model show that a negative impact on credit default swap spreads is observed based on the analysed data. However, there is high variation between the analysed countries so that a country-specific evaluation instead of a general review is recommended by the author.
Author: Marti Subrahmanyam Publisher: Now Publishers ISBN: 9781601989000 Category : Business & Economics Languages : en Pages : 150
Book Description
Credit Default Swaps: A Survey is the most comprehensive review of all major research domains involving credit default swaps (CDS). CDS have been growing in importance in the global financial markets. However, their role has been hotly debated, in industry and academia, particularly since the credit crisis of 2007-2009. The authors review the extant literature on CDS that has accumulated over the past two decades and divide the survey into seven topics after providing a broad overview in the introduction. The second section traces the historical development of CDS markets and provides an introduction to CDS contract definitions and conventions. The third section discusses the pricing of CDS, from the perspective of no-arbitrage principles, structural, and reduced-form credit risk models. It also summarizes the literature on the determinants of CDS spreads, with a focus on the role of fundamental credit risk factors, liquidity and counterparty risk. The fourth section discusses how the development of the CDS market has affected the characteristics of the bond and equity markets, with an emphasis on market efficiency, price discovery, information flow, and liquidity. Attention is also paid to the CDS-bond basis, the wedge between the pricing of the CDS and its reference bond, and the mispricing between the CDS and the equity market. The fifth section examines the effect of CDS trading on firms' credit and bankruptcy risk, and how it affects corporate financial policy, including bond issuance, capital structure, liquidity management, and corporate governance. The sixth section analyzes how CDS impact the economic incentives of financial intermediaries. The seventh section reviews the growing literature on sovereign CDS and highlights the major differences between the sovereign and corporate CDS markets. The eighth section discusses CDS indices, especially the role of synthetic CDS index products backed by residential mortgage-backed securities during the financial crisis. The authors close with our suggestions for promising future research directions on CDS contracts and markets.
Author: Ralf Koschmieder Publisher: GRIN Verlag ISBN: 3640632125 Category : Business & Economics Languages : en Pages : 71
Book Description
Scientific Essay from the year 2010 in the subject Business economics - Investment and Finance, , language: English, abstract: Warren Buffet, the world’s richest man, once said that derivatives are financial “weapons of mass destruction.” a term popularized by George W. Bush to describe nuclear arms. Indeed financial derivatives have a far greater impact on the market than their underlying due to their leverage effect. And the most popular and important credit derivatives nowadays are credit default swaps with a current notional value of over 60 trillion US dollars according to ISDA 1 (International Swaps and Derivatives Association) and 58 trillion US dollars according to BIS 2 (Bank for international settlement) respectively. That is more than the whole world’s gross domestic product in the same year! 3 This paper examines the empirical relationship of CDS premium and credit spread by testing on their theoretical equivalence derived by Duffie (1999). It begins with an overview of CDS followed by the theoretical framework. The analysis starts with explanation of testing methods and description of data. After confirming the existence of the basis spread, this paper goes on to analyse the interactions of CDS spread and Bond spread using econometrics methods like Cointegration and Granger Causality tests. Also examined is the leadership of price discovery process between CDS market and traditional bond market.
Author: F. Hagenstein Publisher: Springer ISBN: 0230523293 Category : Business & Economics Languages : en Pages : 355
Book Description
Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
Author: Iva Petrova Publisher: International Monetary Fund ISBN: 1455252859 Category : Business & Economics Languages : en Pages : 28
Book Description
This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.
Author: Mr.Emre Alper Publisher: International Monetary Fund ISBN: 1463931867 Category : Business & Economics Languages : en Pages : 27
Book Description
We investigate the pricing of sovereign credit risk over the period 2008-2010 for selected advanced economies by examining two widely-used indicators: sovereign credit default swap (CDS) and relative asset swap (RAS) spreads. Cointegration analysis suggests the existence of an imperfect market arbitrage relationship between the cash (RAS) and the derivatives (CDS) markets, with price discovery taking place in the latter. Likewise, panel regressions aimed at uncovering the fundamental drivers of the two indicators show that the CDS market, although less liquid, has provided a better signal for sovereign credit risk during the period of the recent financial crisis.
Author: Arne Wilkes Publisher: Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften ISBN: 9783631606049 Category : Bond market Languages : en Pages : 0
Book Description
Credit spreads express how markets evaluate the riskiness of corporate bonds compared to risk-free investments. Since credit spreads have been highly volatile especially during the last decade it is important for academics and practitioners alike to understand the dynamic interdependencies between credit spreads and their determinants. Based on a sample of European corporate bonds and different macroeconomic variables the author analyzes the determinants of credit spreads during the period of 1999 to 2009. With a macro-finance term structure model he shows that the European corporate bond market is largely integrated with some remaining segmentation. Furthermore, panel regressions yield that declining liquidity leads to a significant widening of credit spreads especially during the recent financial crisis. Finally, he demonstrates based on a cointegration analysis that a long-term relationship exists between credit spreads and their determinants and that credit spreads were significantly overpriced after the collapse of Lehman Brothers but have almost returned to equilibrium towards the end of 2009.
Author: Jan Ericsson Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
Using a set of structural models, we evaluate bond yield spreads and the price of default protection for a sample of US corporations. Theory predicts that if credit risk alone explains these two quantities, their magnitudes should be similar. Our findings concur with previous results that bond yield spreads are underestimated. However, this is not systematically the case for CDS premia, which in our dataset are much lower than bond spreads. Furthermore, our results highlight the strong relationship between bond residuals and nondefault proxies, in particular illiquidity. CDS residuals exhibit no such relations. This suggests that the bond spread underestimation by our structural models may not stem from their inability to properly account for default risk, but rather from the importance of the omitted risk factors.
Author: Verena Anna Berger
Author: Verena Anna Berger
Author: Marti Subrahmanyam
Author: Ralf Koschmieder
Author: F. Hagenstein
Author: Iva Petrova
Author: Mr.Emre Alper
Author: Ilhyock Shim
Author: Arne Wilkes
Author: Haibin Zhu
Author: Jan Ericsson