An Empirical Analysis Of The Dynamic Relationship Between Investment Grade Bonds And Credit Default Swaps

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An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps

Author : Roberto Blanco
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (249 download)

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Book Synopsis An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps by : Roberto Blanco

Download or read book An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps written by Roberto Blanco and published by . This book was released on 2003 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In this paper the behaviour of credit default swaps (CDS) are analysed for a sample of firms and support found for the theoretical equivalence of CDS prices and credit spreads. When this is violated, the CDS price can be viewed as an upper bound on the price of credit risk, while the spread provides a lower bound. It is shown that the CDS market is the main forum for credit risk price discovery and that CDS prices are better integrated with firm-specific variables in the short run. Both markets equally reflect these factors in the long run, and this is primarily brought about by bond market adjustment"--Bank of England web site

An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps

Author : Roberto Blanco Escolar
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (641 download)

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Book Synopsis An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps by : Roberto Blanco Escolar

Download or read book An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Default Swaps written by Roberto Blanco Escolar and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the behaviour of credit default swaps (CDS) for a sample of firms and finds support for the theoretical equivalence of CDS prices and credit spreads. When this is violated, the CDS price can be viewed as an upper bound on the price of credit risk, while the spread provides a lower bound. The paper shows that the CDS market is the main forum for credit risk price discovery and that CDS prices are better integrated with firm-specific variables in the short run. Both markets equally reflect these factors in the long run, and this is primarily brought about by bond market adjustment.

An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Defautl Swaps

Author : Roberto Blanco
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (433 download)

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Book Synopsis An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Defautl Swaps by : Roberto Blanco

Download or read book An Empirical Analysis of the Dynamic Relationship Between Investment-grade Bonds and Credit Defautl Swaps written by Roberto Blanco and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

An Empirical Analysis of the Dinamic Relationship Btween Investment-grade Bonds and Credit Default Swaps

Author :
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (912 download)

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Book Synopsis An Empirical Analysis of the Dinamic Relationship Btween Investment-grade Bonds and Credit Default Swaps by :

Download or read book An Empirical Analysis of the Dinamic Relationship Btween Investment-grade Bonds and Credit Default Swaps written by and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Relationship Between Equity Prices and Credit Default Swap Spreads

Author : Ida Buus
Publisher :
ISBN 13 :
Total Pages : 114 pages
Book Rating : 4.:/5 (767 download)

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Book Synopsis The Relationship Between Equity Prices and Credit Default Swap Spreads by : Ida Buus

Download or read book The Relationship Between Equity Prices and Credit Default Swap Spreads written by Ida Buus and published by . This book was released on 2009 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: The period after the beginning of the crisis than before. This indicates that the relationship between CDS spreads and equity prices is stronger under deteriorating market conditions. Furthermore we examine how the credit rating of the underlying entity affects the relationship. We do this by splitting our data in investment grade and high yield. The influence of equity prices on CDS spreads is stronger for the high yield model than the investment grade model. This indicates that the relationship between CDS spreads and equity prices is stronger the lower the credit rating of the underlying entity. At last we examine how the size of the CDS spread effects the relationship. We do this by splitting our data into quartiles. We split the data for index, before and after the beginning of the crisis, high yield, and investment grade. We find that when comparing the quartiles against each otherthe influence of equity prices on CDS spreads is strongest for quartile 4, second strongest for quartile 3, third strongest for quartile 2 and least strongest for quartile 1. Moreover when comparing the quartile models with their respective overall index we find that quartile 3 and 4 are stronger models than the overall model except for the models for high yield and investment grade. The overall conclusion is that there is a negative relationship between CDS spreads and equity prices and that equity prices lead CDS spreads.

The Empirical Relationship Between the Spreads of Credit Default Swaps and Bonds

Author : Ralf Koschmieder
Publisher : GRIN Verlag
ISBN 13 : 3640632540
Total Pages : 73 pages
Book Rating : 4.6/5 (46 download)

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Book Synopsis The Empirical Relationship Between the Spreads of Credit Default Swaps and Bonds by : Ralf Koschmieder

Download or read book The Empirical Relationship Between the Spreads of Credit Default Swaps and Bonds written by Ralf Koschmieder and published by GRIN Verlag. This book was released on 2010-10 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Credit Default Swaps

Author : Marti Subrahmanyam
Publisher : Now Publishers
ISBN 13 : 9781601989000
Total Pages : 150 pages
Book Rating : 4.9/5 (89 download)

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Book Synopsis Credit Default Swaps by : Marti Subrahmanyam

Download or read book Credit Default Swaps written by Marti Subrahmanyam and published by Now Publishers. This book was released on 2014-12-19 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation

Author : Stefan Trück
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation by : Stefan Trück

Download or read book The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation written by Stefan Trück and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the term structure of credit spreads and credit default swaps for different rating categories. It is well-known quite that for issuers with lower credit quality higher spreads can be observed in the market and vice versa. However, empirical results on spreads for bonds with the same rating but different maturities are rather controversial. We provide empirical results on the term structure of credit spreads based on a large sample of Eurobonds and domestic bonds from EWU-countries. Further we investigate maturity effects on credit default swaps and compare the results to those of corporate bonds. We find that for both instruments a positive relationship between maturity and spreads could be observed for investment grade debt. For speculative grade debt the results are rather ambiguous. We also find that spreads for the same rating class and same maturity exhibit very high variation.

The Dynamics of Sovereign Credit Default Swap and Bond Markets

Author : Erdem Aktug
Publisher :
ISBN 13 :
Total Pages : 18 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Dynamics of Sovereign Credit Default Swap and Bond Markets by : Erdem Aktug

Download or read book The Dynamics of Sovereign Credit Default Swap and Bond Markets written by Erdem Aktug and published by . This book was released on 2014 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates the dynamic relationship between sovereign credit default swap (CDS) and bond markets over the period 2001 to 2007 across 30 emerging markets. Our results suggest that the bond markets play a significant role in the price discovery process, which is in contrast with the corporate studies. We also show that the CDS markets play a more dominant role in lead-lag relationships compared to earlier studies on the sovereign credit markets.

The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions

Author : Jiri Podpiera
Publisher : International Monetary Fund
ISBN 13 : 1455200573
Total Pages : 34 pages
Book Rating : 4.4/5 (552 download)

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Book Synopsis The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions by : Jiri Podpiera

Download or read book The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions written by Jiri Podpiera and published by International Monetary Fund. This book was released on 2010-06-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that LCFIs’ business models, earnings potential, and economic uncertainty (represented by market expectations about the future risks of a particular LCFI and market views on prospects for economic growth) are among the most significant determinants of credit risk. The findings of the paper are broadly consistent with those of the literature on bank failure, where the determinants of the latter include the entire CAMELS structure - that is, Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. By establishing a link between the financial and market fundamentals of LCFIs and their CDS spreads, the paper offers a potential tool for fundamentals-based vulnerability and early warning system for LCFIs.

Determinants of Credit Spreads

Author : Arne Wilkes
Publisher : Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften
ISBN 13 : 9783631606049
Total Pages : 0 pages
Book Rating : 4.6/5 (6 download)

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Book Synopsis Determinants of Credit Spreads by : Arne Wilkes

Download or read book Determinants of Credit Spreads written by Arne Wilkes and published by Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften. This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Credit Derivatives Pricing Models

Author : Philipp J. Schönbucher
Publisher : John Wiley & Sons
ISBN 13 : 0470868171
Total Pages : 396 pages
Book Rating : 4.4/5 (78 download)

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Book Synopsis Credit Derivatives Pricing Models by : Philipp J. Schönbucher

Download or read book Credit Derivatives Pricing Models written by Philipp J. Schönbucher and published by John Wiley & Sons. This book was released on 2003-10-31 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: The credit derivatives market is booming and, for the first time, expanding into the banking sector which previously has had very little exposure to quantitative modeling. This phenomenon has forced a large number of professionals to confront this issue for the first time. Credit Derivatives Pricing Models provides an extremely comprehensive overview of the most current areas in credit risk modeling as applied to the pricing of credit derivatives. As one of the first books to uniquely focus on pricing, this title is also an excellent complement to other books on the application of credit derivatives. Based on proven techniques that have been tested time and again, this comprehensive resource provides readers with the knowledge and guidance to effectively use credit derivatives pricing models. Filled with relevant examples that are applied to real-world pricing problems, Credit Derivatives Pricing Models paves a clear path for a better understanding of this complex issue. Dr. Philipp J. Schönbucher is a professor at the Swiss Federal Institute of Technology (ETH), Zurich, and has degrees in mathematics from Oxford University and a PhD in economics from Bonn University. He has taught various training courses organized by ICM and CIFT, and lectured at risk conferences for practitioners on credit derivatives pricing, credit risk modeling, and implementation.

Mathematics of Derivative Securities

Author : Michael A. H. Dempster
Publisher : Cambridge University Press
ISBN 13 : 9780521584241
Total Pages : 614 pages
Book Rating : 4.5/5 (842 download)

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Book Synopsis Mathematics of Derivative Securities by : Michael A. H. Dempster

Download or read book Mathematics of Derivative Securities written by Michael A. H. Dempster and published by Cambridge University Press. This book was released on 1997-10-13 with total page 614 pages. Available in PDF, EPUB and Kindle. Book excerpt: During 1995 the Isaac Newton Institute for the Mathematical Sciences at Cambridge University hosted a six month research program on financial mathematics. During this period more than 300 scholars and financial practitioners attended to conduct research and to attend more than 150 research seminars. Many of the presented papers were on the subject of financial derivatives. The very best were selected to appear in this volume. They range from abstract financial theory to practical issues pertaining to the pricing and hedging of interest rate derivatives and exotic options in the market place. Hence this book will be of interest to both academic scholars and financial engineers.

Credit Default Swaps

Author : Christopher L. Culp
Publisher : Springer
ISBN 13 : 3319930761
Total Pages : 356 pages
Book Rating : 4.3/5 (199 download)

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Book Synopsis Credit Default Swaps by : Christopher L. Culp

Download or read book Credit Default Swaps written by Christopher L. Culp and published by Springer. This book was released on 2018-07-12 with total page 356 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, unique in its composition, reviews the academic empirical literature on how CDSs actually work in practice, including during distressed times of market crises. It also discusses the mechanics of single-name and index CDSs, the theoretical costs and benefits of CDSs, as well as comprehensively summarizes the empirical evidence on important aspects of these instruments of risk transfer. Full-time academics, researchers at financial institutions, and students will benefit from the dispassionate and comprehensive summary of the academic literature; they can read this book instead of identifying, collecting, and reading the hundreds of academic articles on the important subject of credit risk transfer using derivatives and benefit from the synthesis of the literature provided.

Global Credit Review

Author : Risk Management Institute
Publisher : World Scientific
ISBN 13 : 9814412643
Total Pages : 195 pages
Book Rating : 4.8/5 (144 download)

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Book Synopsis Global Credit Review by : Risk Management Institute

Download or read book Global Credit Review written by Risk Management Institute and published by World Scientific. This book was released on 2013 with total page 195 pages. Available in PDF, EPUB and Kindle. Book excerpt: This annual publication provides an overview of the most important developments in global credit markets and the regulatory landscape. It covers theoretical and empirical research on credit ratings and credit risk, and reports on recent findings and evolutions of the Risk Management Institute's Credit Research Initiative. The ultimate objective of this publication is to advance the state of research and development in the critical area of credit risk and rating systems. With a distinctive focus on topics related to credit markets and credit risk, this publication will be useful to finance professionals, policy makers and academics with an interest in credit markets.

Handbook of Quantitative Finance and Risk Management

Author : Cheng-Few Lee
Publisher : Springer Science & Business Media
ISBN 13 : 0387771174
Total Pages : 1700 pages
Book Rating : 4.3/5 (877 download)

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Book Synopsis Handbook of Quantitative Finance and Risk Management by : Cheng-Few Lee

Download or read book Handbook of Quantitative Finance and Risk Management written by Cheng-Few Lee and published by Springer Science & Business Media. This book was released on 2010-06-14 with total page 1700 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quantitative finance is a combination of economics, accounting, statistics, econometrics, mathematics, stochastic process, and computer science and technology. Increasingly, the tools of financial analysis are being applied to assess, monitor, and mitigate risk, especially in the context of globalization, market volatility, and economic crisis. This two-volume handbook, comprised of over 100 chapters, is the most comprehensive resource in the field to date, integrating the most current theory, methodology, policy, and practical applications. Showcasing contributions from an international array of experts, the Handbook of Quantitative Finance and Risk Management is unparalleled in the breadth and depth of its coverage. Volume 1 presents an overview of quantitative finance and risk management research, covering the essential theories, policies, and empirical methodologies used in the field. Chapters provide in-depth discussion of portfolio theory and investment analysis. Volume 2 covers options and option pricing theory and risk management. Volume 3 presents a wide variety of models and analytical tools. Throughout, the handbook offers illustrative case examples, worked equations, and extensive references; additional features include chapter abstracts, keywords, and author and subject indices. From "arbitrage" to "yield spreads," the Handbook of Quantitative Finance and Risk Management will serve as an essential resource for academics, educators, students, policymakers, and practitioners.

Contemporary Issues in Financial Institutions and Markets

Author : Claudia Girardone
Publisher : Routledge
ISBN 13 : 1317610040
Total Pages : 143 pages
Book Rating : 4.3/5 (176 download)

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Book Synopsis Contemporary Issues in Financial Institutions and Markets by : Claudia Girardone

Download or read book Contemporary Issues in Financial Institutions and Markets written by Claudia Girardone and published by Routledge. This book was released on 2016-04-14 with total page 143 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book showcases recent academic work on contemporary issues in financial institutions and markets. It covers a broad range of topics, highlighting the diverse nature of academic research in banking and finance. As a consequence the contributions cover a wide range of issues across a broad spectrum, including: capital structure arbitrage, credit rating agencies, credit default swap spreads, market power in the banking industry and stock returns. This timely collection offers fresh insights and understandings into the ongoing debates within and between the academic and professional finance communities. This book was originally published as a special issue of the European Journal of Finance.