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Credit Spread Changes Within Switching Regimes
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Book Synopsis Credit Spread Changes within Switching Regimes by : Olfa Maalaoui Chun
Download or read book Credit Spread Changes within Switching Regimes written by Olfa Maalaoui Chun and published by . This book was released on 2013 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical studies on credit spread determinants are predicated on the presence of a single-regime over the entire sample period and thus find limited explanatory power. We show that a single regime model hides the fact that the explanatory variables take on different loadings across changing patterns in credit spreads. We capture these hidden effects by modeling endogenous (rating-specific) regimes for credit spreads. We find that in a two regime-based model traditional determinants have significant explanatory power consistent with the prediction of structural models, yet their importance changes across regimes -- some variables have their effects strengthen, weaken or even reverse signs across regimes. We also investigate the differing behavior of these loadings across different specifications of the economic cycle and find that endogenous regimes best capture the hidden effects of these variables with the highest explanatory power for the same set of variables.
Book Synopsis Credit Spread Changes Within Switching Regimes by :
Download or read book Credit Spread Changes Within Switching Regimes written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Treasury Yields and Credit Spread Dynamics by : Dimitris A. Georgoutsos
Download or read book Treasury Yields and Credit Spread Dynamics written by Dimitris A. Georgoutsos and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to shed new light on the conflicting empirical evidence on the relationship between credit spreads and Treasury rates. Following a general-to-specific modelling approach, we were unable to accept the presence of a long-run relationship between Baa credit spreads and long-term Treasury rates. At the same time, and in support of the structural models on credit risk modelling, a negative short-run relationship was obtained by means of impulse response functions. Subsequently, by employing a regime-switching estimation technique, we were able to establish the importance of the Treasury yield curve slope for the Baa credit spread determination in periods characterized by low interest rate volatility. Finally, we were able to provide evidence of an asymmetric response of the Baa credit spread to term spread changes according to the source of these changes, i.e. short or long term Treasury rates.
Book Synopsis Money, Trade and Finance by : Ioanna T. Kokores
Download or read book Money, Trade and Finance written by Ioanna T. Kokores and published by Palgrave Macmillan. This book was released on 2022-11-09 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book analyses several aspects on the efficient resource allocation in the aftermath of the global financial crisis and the European sovereign debt crisis. The main focus of the volume is on recent European Union (EU) experience highlighting the interrelation between inherent structural rigidities and practical limitations in the conduct of sound economic policy. Special reference is made to Greece (evidencing unprecedented experience), the EU periphery countries and the US. This book will be of interest to academic and central bank researchers, business practitioners (in consultancy and finance) and graduate students, as it is a good example of how scholarly dialogue can contribute to contemporary high-quality policy debate on sound liquidity provision and financial stability in the Eurozone, as well as the effective ways to combat recession in the EU periphery countries.
Book Synopsis Time Variation in U.S. Monetary Policy and Credit Spreads by : Yu-Fan Huang
Download or read book Time Variation in U.S. Monetary Policy and Credit Spreads written by Yu-Fan Huang and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Through the lens of the Taylor rule, this paper is concerned with the circumstances in which the Fed would change its behavior. A Bayesian MCMC method is proposed to deal with a switching Taylor rule robust to zero lower bound and heteroscedasticity. The posterior results from Markov-switching Taylor rule indicate that, first, there is strong evidence for an “active” regime in which the Fed responses to output gap aggressively. Second, the movements in the posterior probability of the active regime is highly correlated with credit spreads. I then use a switching Taylor rule with transition probabilities connected to credit spreads to show that the positive correlation is strongly supported by data, implying that the Fed responses to output gap more strongly when the credit spreads rise.
Book Synopsis Regime-switching Determinants of Emerging Markets Sovereign Credit Risk Swaps Spread by : Jason Z. Ma
Download or read book Regime-switching Determinants of Emerging Markets Sovereign Credit Risk Swaps Spread written by Jason Z. Ma and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Cycle Dependent Spread Determinants in Emerging Sovereign Debt Markets by : Christoph Riedel
Download or read book Credit Cycle Dependent Spread Determinants in Emerging Sovereign Debt Markets written by Christoph Riedel and published by . This book was released on 2013 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We address credit cycle dependent sovereign credit risk determinants. In our model, the spread determinants' magnitude is conditional on an unobservable endogenous sovereign credit cycle as represented by the underlying state of a Markov regime switching process. Our explanatory variables are motivated in the tradition of structural credit risk models and include changes in asset prices, interest rates, implied market volatility, gold price changes and foreign exchange rates. We examine daily frequency variations of U.S. dollar denominated Eurobond credit spreads of four major Latin American sovereign bond issuers (Brazil, Colombia, Mexico and Venezuela) with liquid bond markets during March 2000 to June 2011. We find that spread determinants are statistically significant and consistent with theory, while their magnitude remarkably varies with the state of the credit cycle. Crisis states are characterized by high spread change uncertainty and high sensitivities with respect to the spread change determinants. We further document that not only changes of local currencies, but also changes of the Euro with respect to the U.S. dollar are significant spread drivers and argue that this is consistent with the sovereigns' ability to pay.
Book Synopsis An Intensity Model for Credit Risk with Switching Lévy Processes by : Donatien Hainaut
Download or read book An Intensity Model for Credit Risk with Switching Lévy Processes written by Donatien Hainaut and published by . This book was released on 2014 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a switching regime version of the intensity model for credit risk pricing. The default event is specified by a Poisson process whose intensity is modeled by a switching Lévy process. This model presents several interesting features. Firstly, as Lévy processes encompass numerous jump processes, our model can duplicate sudden jumps observed in credit spreads. Also, due to the presence of jumps, probabilities do not vanish at very short maturities, contrary to models based on Brownian dynamics. Furthermore, as parameters of the Lévy process are modulated by a hidden Markov chain, our approach is well suited to model changes of volatility trends in credit spreads, related to modifications of unobservable economic factors.
Book Synopsis Regimes in CDS Spreads by : Carol Alexander
Download or read book Regimes in CDS Spreads written by Carol Alexander and published by . This book was released on 2006 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the determinants of the iTraxx CDS Europe indices, finding strong evidence that they are regime dependent. During volatile periods credit spreads become highly sensitive to stock volatility and more sensitive to this than to stock returns. They are also almost immune to interest rates changes. During tranquil periods credit spreads are more sensitive to stock returns than to volatility and most indices are sensitive to interest rate moves. However for companies in the financial sector interest rates have no significant influence in either regime. We also found some evidence that raising interest rates can decrease the probability of credit spreads entering a volatile period. Our findings are useful for policy makers and, since equity hedge ratios based on single-state models cannot capture the regime dependent behaviour of credit spreads, our results may also help traders to improve the efficiency of hedging credit default swaps. Finally, the volatility clustering and autocorrelation that we have identified in the price dynamics of iTraxx indices should prove useful for pricing the iTraxx options that are now being actively traded over-the-counter.
Book Synopsis Rare Events and Return Predictability in a Regime Switching Setting by : Heinrich Kick
Download or read book Rare Events and Return Predictability in a Regime Switching Setting written by Heinrich Kick and published by . This book was released on 2014 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inspired by the recent literature on rare events and their impact on asset prices, we investigate the return predictability properties of a set of variables related to the risk of tail events extracted from equity market information and measures based on credit spreads. Our variables outperform traditional variables in terms of fit at the monthly prediction horizon. We employ both a linear model as well as a model allowing for structural breaks to obtain a better understanding of the nature of the predictability relationship. We find evidence for pronounced changes in the way the predictor variables relate to future realized returns between normal times and states of crisis, supporting theoretical models that accommodate these changes. The out-of-sample investigations show that when allowing the transition probabilities to depend on a crisis related variable, the regime switching model yields more precise forecasts than any linear model or naive forecasting method considered here. However, the regime switching models do not have a general advantage over linear models due to the difficulties in forecasting the correct future state for longer forecasting horizons, as structural breaks tend to occur suddenly.
Book Synopsis A Unified Framework for Regime-Switching Models by : Ning Cai
Download or read book A Unified Framework for Regime-Switching Models written by Ning Cai and published by . This book was released on 2019 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching models have been widely used in many areas such as finance, biomedicine, and healthcare. However, the computations under these models are usually challenging due to the complexities incurred by regime changes. We provide a unified analytical approximation framework for accurate and efficient computations of the distributions of a variety of practically useful quantities, including first passage times, running extrema, and time integrals, under general regime-switching Markov models, where the state variable in each regime follows a general Markov process. Furthermore, based on our result about the first passage time distributions, we develop an EM algorithm to fit data related to the generalized phase-type distributions. We apply our framework to biomedicine and healthcare (e.g., HIV incubation time, modeling of carcinogenesis, and distribution fitting for service time in healthcare systems) and finance (e.g., implied volatilities, credit spreads, valuation of marketability, and pricing of path-dependent options). Numerical results indicate that adding regime switching can have significant effects on the modeling implications.
Book Synopsis Corporate Risk Management by : Georges Dionne
Download or read book Corporate Risk Management written by Georges Dionne and published by John Wiley & Sons. This book was released on 2019-04-30 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt: An updated review of the theories and applications of corporate risk management After the financial crisis of 2008, issues concerning corporate risk management arose that demand new levels of oversight. Corporate Risk Management is an important guide to the topic that puts the focus on the corporate finance dimension of risk management. The author—a noted expert on the topic—presents several theoretical models appropriate for various industries and empirically verifies theoretical propositions. The book also proposes statistical modeling that can evaluate the importance of different risks and their variations according to economic cycles. The book provides an analysis of default, liquidity, and operational risks as well as the failures of LTCM, ENRON, and financial institutions that occurred during the financial crisis. The author also explores Conditional Value at Risk (CVaR), which is central to the debate on the measurement of market risk under Basel III. This important book: Includes a comprehensive review of the aspects of corporate risk management Presents statistical modeling that addresses recent risk management issues Contains an analysis of risk management failures that lead to the 2008 financial crisis Offers a must-have resource from author Georges Dionne the former editor of The Journal of Risk and Insurance Corporate Risk Management provides a modern empirical analysis of corporate risk management across industries. It is designed for use by risk management professionals, academics, and graduate students.
Book Synopsis What Determines U.S. Swap Spreads? by : Ádám Kóbor
Download or read book What Determines U.S. Swap Spreads? written by Ádám Kóbor and published by World Bank Publications. This book was released on 2005 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: References p. 45-47.
Book Synopsis International Convergence of Capital Measurement and Capital Standards by :
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis From Statistics to Mathematical Finance by : Dietmar Ferger
Download or read book From Statistics to Mathematical Finance written by Dietmar Ferger and published by Springer. This book was released on 2017-10-28 with total page 437 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, dedicated to Winfried Stute on the occasion of his 70th birthday, presents a unique collection of contributions by leading experts in statistics, stochastic processes, mathematical finance and insurance. The individual chapters cover a wide variety of topics ranging from nonparametric estimation, regression modelling and asymptotic bounds for estimators, to shot-noise processes in finance, option pricing and volatility modelling. The book also features review articles, e.g. on survival analysis.
Book Synopsis Risk Measures with Applications in Finance and Economics by : Michael McAleer
Download or read book Risk Measures with Applications in Finance and Economics written by Michael McAleer and published by MDPI. This book was released on 2019-07-23 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk measures play a vital role in many subfields of economics and finance. It has been proposed that risk measures could be analysed in relation to the performance of variables extracted from empirical real-world data. For example, risk measures may help inform effective monetary and fiscal policies and, therefore, the further development of pricing models for financial assets such as equities, bonds, currencies, and derivative securities.A Special Issue of “Risk Measures with Applications in Finance and Economics” will be devoted to advancements in the mathematical and statistical development of risk measures with applications in finance and economics. This Special Issue will bring together the theory, practice and real-world applications of risk measures. This book is a collection of papers published in the Special Issue of “Risk Measures with Applications in Finance and Economics” for Sustainability in 2018.
Book Synopsis What Determines U.S. Swap Spreads? by : 3/4dm̀ Kb̤or
Download or read book What Determines U.S. Swap Spreads? written by 3/4dm̀ Kb̤or and published by World Bank Publications. This book was released on with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
