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Author :
Publisher :
ISBN 13 : 9789172589018
Total Pages : 236 pages
Book Rating : 4.5/5 (89 download)
Download or read book Essays on Sovereign Credit Risk and Credit Default Swap Spreads written by and published by . This book was released on 2013 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Yi Li
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (119 download)
Download or read book Essays on Sovereign Credit Default Swaps written by Yi Li and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays on sovereign credit default swaps (CDSs). The first essay studies the relationship between the China sovereign and bank CDS spreads and the determinants of the China sovereign CDS spread changes using the copula model and regression analysis. Our results show a strengthened tail dependence of sovereign-bank CDS pairs, and the tail dependence coefficient is higher for commercial banks than for policy banks. U.S. stock market returns, high-yield spread changes, and changes in foreign currency reserve/GDP ratio are important global and macroeconomic factors in explaining variation in China's sovereign credit risk. Domestic factors play important roles in explaining the China sovereign CDS spread changes, especially during the trade war period. The second essay studies the explanatory power of country-level and market-level volatilities for Western European sovereign CDS spreads during the European sovereign debt crisis and short-selling ban periods. We include both historical and option-implied volatility measures. Our results show that the changes in country-specific and market-level volatilities are important factors in explaining the sovereign CDS spread changes and that option-implied volatility contains more information than historical volatility. Our results also raise the question of whether there should be a universal ban on short selling. The last essay examines the dependence structure of the sovereign CDS spreads between the U.S. and 36 countries located in Western Europe, Central & Eastern Europe, Latin America, and Asia. Our results show that the tail dependence coefficients of U.S.-Western European and U.S.-Central & Eastern European sovereign CDS pairs are non-zero. We perform a cross-sectional analysis to study the determinants of co-dependence. The results show that higher trade flow and larger foreign exposure of the U.S. banking system are associated with a higher probab.
Author : Tingwei Wang
Publisher :
ISBN 13 :
Total Pages : 152 pages
Book Rating : 4.:/5 (96 download)
Download or read book Three Essays on Sovereign Credit Risk written by Tingwei Wang and published by . This book was released on 2016 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Author : Mr.Jorge A. Chan-Lau
Publisher : International Monetary Fund
ISBN 13 : 1451852916
Total Pages : 21 pages
Book Rating : 4.4/5 (518 download)
Download or read book Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises written by Mr.Jorge A. Chan-Lau and published by International Monetary Fund. This book was released on 2003-05-01 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In reduced-form pricing models, it is usual to assume a fixed recovery rate to obtain the probability of default from credit default swap prices. An alternative credit risk measure is proposed here: the maximum recovery rate compatible with observed prices. The analysis of the recent debt crisis in Argentina using this methodology shows that the correlation between the maximum recovery rate and implied default probabilities turns negative in advance of the credit event realization. This empirical finding suggests that the maximum recovery rate can be used for constructing early warning indicators of financial distress.
Author : Mr.Emre Alper
Publisher : International Monetary Fund
ISBN 13 : 1463931867
Total Pages : 27 pages
Book Rating : 4.4/5 (639 download)
Download or read book Pricing of Sovereign Credit Risk written by Mr.Emre Alper and published by International Monetary Fund. This book was released on 2012-01-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 : Asta Klimaviciene
Publisher :
ISBN 13 :
Total Pages : 223 pages
Book Rating : 4.:/5 (15 download)
Download or read book Essays on Emerging Market Sovereign Credit Risk and the Sovereign Credit Default Swap Market written by Asta Klimaviciene and published by . This book was released on 2009 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Andreas Bang Nielsen
Publisher :
ISBN 13 : 9788793579996
Total Pages : pages
Book Rating : 4.5/5 (799 download)
Download or read book Essays on Foreign Exchange and Credit Risk written by Andreas Bang Nielsen and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Patrick Augustin
Publisher :
ISBN 13 :
Total Pages : 61 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Term Structure of CDS Spreads and Sovereign Credit Risk written by Patrick Augustin and published by . This book was released on 2018 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: I study the term structure of credit default swap spreads to understand the dynamics of global and country-specific risk factors in explaining the time-variation in sovereign credit risk. The analysis suggests that the shape of the term structure conveys significant information on the relative importance of global and domestic risk. When the spread curve is upward sloping, global shocks are the dominant force underlying changes in the price of sovereign credit risk. Nonetheless, domestic shocks become relatively more important when the term structure is inverted. To draw these conclusions, I develop a recursive preference-based model with long-run risk for credit default swaps. The underlying default process, which modulates expectations about future default probabilities, is modeled to depend both on global macroeconomic uncertainty and country-specific risk. Time-variation in the slope can be explained through the joint dynamics of aggregate and idiosyncratic shocks in connection with investor preferences. Additional supporting evidence of the model-implied results is provided by empirical analysis using a panel of 44 geographically dispersed countries. First, the variation in spreads explained by their first common component decreases during the sovereign debt crisis. Second, country-specific fundamentals explain relatively more spread variation of distressed countries, which are characterized through a downward sloping spread curve. Third, the explanatory power of domestic factors is monotonically increasing with the number of months the term structure was inverted. Overall, these findings support the view that both sources of risk are important, they simply matter at different points in time.
Author : Go Tamakoshi
Publisher : Routledge
ISBN 13 : 1351997033
Total Pages : 194 pages
Book Rating : 4.3/5 (519 download)
Download or read book Credit Default Swap Markets in the Global Economy written by Go Tamakoshi and published by Routledge. This book was released on 2018-01-19 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive overview for various segments of the global credit default swap (CDS) markets, touching upon how they were affected by the recent financial turmoil. The book uses empirical analysis on credit default swap markets, applying advanced econometric methodologies to the time series data. It covers not only well-studied sovereign credit default swap markets but also sector credit default swap indices (i.e., CDS index for the banking sector) and corporate credit default swap indices (i.e., Markit iTraxx Japan CDS index), which have not been fully examined by the previous literature. The book also investigates causality and co-movement among several credit default swap markets, or between CDS and other financial markets.
Author : Panagiotis Papadopoulos
Publisher : GRIN Verlag
ISBN 13 : 364089149X
Total Pages : 61 pages
Book Rating : 4.6/5 (48 download)
Download or read book Credit Default Swaps - Pricing, Valuation and Investment Applications written by Panagiotis Papadopoulos and published by GRIN Verlag. This book was released on 2011-04 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2010 in the subject Business economics - Investment and Finance, grade: 67%, University of Westminster (Westminster Business School), course: Financial Derivatives, language: English, abstract: "A credit default swap (CDS) is a bilateral agreement designed explicitly to shift credit risk between two parties. In a CDS, one party (protection buyer) pays a periodic fee to another party (protection seller) in return for compensation for default (or similar credit event) by a reference entity". Credit Default Swaps (CDS) are by far the most popular credit derivatives and have proven to be the most successful financial innovation. The structure of CDS is somewhat similar to the insurance policy. The market of CDS has heavily expanded and is traded in Over-The-Counter (OTC) market. This essay will briefly address the structure and the market of CDS, outlining its common products usage by some large institutions. Following the review of financial structure and pricing of CDS. And finally, this essay will also evaluate the risk management and investment applications of such products.
Author : Verena Anna Berger
Publisher : Springer
ISBN 13 : 365820219X
Total Pages : 94 pages
Book Rating : 4.6/5 (582 download)
Download or read book Impact of Government Bonds Spreads on Credit Derivatives written by Verena Anna Berger and published by Springer. This book was released on 2017-11-30 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 : Mr.Manmohan Singh
Publisher : International Monetary Fund
ISBN 13 : 1451875835
Total Pages : 9 pages
Book Rating : 4.4/5 (518 download)
Download or read book Are Credit Default Swaps Spreads High in Emerging Markets written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2003-12-01 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: In times of distress when a country loses access to markets, there is evidence that credit default swap (CDS) spreads are a leading indicator for sovereign risk than the EMBI+ sub-index for the country. However, it is not easy to discern the variables that determine the level of CDS spreads in Emerging Markets (EM); traders only quote the CDS spreads and not the inputs that are required to calculate such spreads. This note provides some evidence from Argentina and Brazil that reveals inconsistency between theory and practice in pricing CDS spreads in EM. This note suggests an alternate methodology that links CTD (cheapest-to-deliver) bonds to recovery values assumed in CDS contracts. Furthermore, special features that pertain to CDS contracts (repo specialness, short squeezes by central banks) may also magnify the financial distress of a sovereign.
Author : Wolfgang Schöpf
Publisher : diplom.de
ISBN 13 : 383664973X
Total Pages : 86 pages
Book Rating : 4.8/5 (366 download)
Download or read book Credit Default Swap Trading Strategies written by Wolfgang Schöpf and published by diplom.de. This book was released on 2010-07-23 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Introduction: Credit default swaps are by far the most often traded credit derivatives and the credit default swap markets have seen tremendous growth over the past two decades. Put simply, a credit default swap is a tradeable contract that provides insurance against the default of a certain debtor. Initially, when the first form of a credit default swap (CDS) was traded in 1991, they were mainly used by commercial banks in order to lay off credit risk to insurance companies. However, focus shifted in the subsequent years as new players entered the market. Hedge funds became big players, money managers and reinsurers entered, and banks started to not only buy protection on their assets but also sell protection in order to diversify their portfolios. All this led to today s CDS market being dominated by investors rather than banks and, as a consequence, CDSs are now structured to meet investors needs instead of those of the banks. Over the same time as this shift to an investor orientated market took place, CDS markets grew at an astonishing rate with notional amount outstanding pretty much doubling every year until peaking in the second half of 2007 at USD 62,173.20 billions. The need to effciently transfer credit risk as well as the increasing standardization of CDS contracts by the International Swaps and Derivatives Association propelled this development. Only in 2008 did the notional amount outstanding in CDSs retract for the first time and come down to USD 31,223.10 billion in the first half of 2009. A partial reason was the full blown financial crisis in which CDSs also played a prominent role. The demise of Lehman Brothers, for example, triggered roughly USD 400 billion in protection payments and American International Group needed to be bailed out in 2008 because it had sold too much CDS protection. Amongst other concerns, these incidents highlight the systemic importance of CDSs. Combined with the phenomenal growth of CDS markets, this makes CDSs a highly relevant component of the current ?nancial environment and a fruitful subject for academic research. Today, just like most other financial instruments, CDSs serve a multitude of purposes spanning hedging, speculation, and arbitrage. The aim of this thesis is to explore these uses further and answer the following research questions: What CDS trading strategies are commonly used and how does a selection of these strategies CDS curve trades including forward CDSs, [...]
Author : Gracia S. Ugut
Publisher : Penerbit NEM
ISBN 13 : 6231153282
Total Pages : 201 pages
Book Rating : 4.2/5 (311 download)
Download or read book Credit Default Swap written by Gracia S. Ugut and published by Penerbit NEM. This book was released on 2024-04-15 with total page 201 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit default swaps and credit derivatives in general are one of the many specialized derivatives that are used for the purpose of hedging, speculation and arbitrage. The primary purpose of a credit derivative or the need behind the creation of such a product is to serve as a credit risk transfer mechanism. Credit risk is one of the four broadly classified types of risks (others being operational risk, market risk and liquidity risk) is the possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. Credit Default Swaps and Credit Derivatives gained popularity in the pre and during Global Financial Crisis in 2008. It has earned a bad reputation since then as it is perceived as one of the most dangerous financial derivatives. The decline in trading volume of emerging market sovereign CDS in the years since the 2008 global financial crisis, along with the steady rise in volume of emerging-market-bond ETFs, might have contributed to this increase in the relative efficiency of bond-price discovery. Credit-Default Swaps (CDS) were generally a better source of price discovery than spreads computed from bond prices. Credit-Default Swaps (CDS) tended to be a better measure of value compared to spreads computed from bonds, which may have been traded infrequently. However, since the COVID-19 crisis, the cash bond market appears to have made strong inroads as the better source for investors to compare relative value and risk.
Author : Jochen Andritzky
Publisher : Springer Science & Business Media
ISBN 13 : 3540374493
Total Pages : 261 pages
Book Rating : 4.5/5 (43 download)
Download or read book Sovereign Default Risk Valuation written by Jochen Andritzky and published by Springer Science & Business Media. This book was released on 2006-11-23 with total page 261 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 : Matthias Schnare
Publisher : GRIN Verlag
ISBN 13 : 365603236X
Total Pages : 95 pages
Book Rating : 4.6/5 (56 download)
Download or read book The negative basis - Credit Default Swap contracts and credit risk during the financial crisis written by Matthias Schnare and published by GRIN Verlag. This book was released on 2011-10-19 with total page 95 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2010 in the subject Economics - Finance, grade: 5.0 (Schweiz), University of Zurich (Wirtschaftswissenschaften), language: English, abstract: The current developments in the credit or bond markets, influenced by the financial crisis and the economic downturn, revive a discussion about credit derivatives as an instrument of speculation and one cause or determinant of the financial crisis. Currently, CDS are used to speculate against the solvency of the different governments. Critics look at CDS contracts as Overthecounter (OTC) instruments that are not regulated and as bilateral contracts which can have a big influence on the financial position of market participants and on the real credit markets. CDS contracts are mainly instruments for investors to insure against a default of the debtor. For the seller of the CDS they are a possibility to participate in risks he perhaps could not have taken on the bond markets otherwise. These contracts separate the default risk of the debtor from the market conditions, e.g. the market interest rates. They make it possible to only trade the credit risk of a company or a country. Therefore, they can be instruments to proof the bond values and indicators for the real credit risk of the underlying. The discussion about CDS contracts is mostly a discussion including many prejudices and it deals with aspects from different topics which cannot be mixed. Therefore, a clear picture of advantages and disadvantages and especially values and risks of CDS is difficult to be found in the current public discussion and economic newspaper articles. A further phenomenon is that bond markets and CDS markets have lost their connection in the financial crisis. So the credit risk on both markets is valued differently: the prices on the two markets differed so much that market participants used these arbitrage possibilities to earn credit riskfree money for themselves and their customers It can be traded with a simple combination of the underlying bond and the fitting CDS contract. One of the causes of the basis can be the different liquidity level in the two separated markets. For the development of the basis during the crisis it is important to ask how big the changes are compared to the situation before the financial crisis and also how important the credit rating or the industry of the reference entity is.. The price difference, if the CDS price is lower than the credit risk priced by the bond of the same reference entity, is negative basiscalled
Author : Jochen R. Andritzky
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (318 download)
Download or read book The Pricing of Credit Default Swaps During Distress written by Jochen R. Andritzky and published by International Monetary Fund. This book was released on 2006-11 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit default swaps (CDS) provide the buyer with insurance against certain types of credit events by entitling him to exchange any of the bonds permitted as deliverable against their par value. Unlike bonds, whose risk spreads are assumed to be the product of default risk and loss rate, CDS are par instruments, and their spreads reflect the partial recovery of the delivered bond's face value. This paper addresses the implications of the difference between bond and CDS spreads and shows the extent to which the recovery assumption matters for determining CDS spreads. A no-arbitrage argument is applied to extract recovery rates from CDS and bond markets, using data from Brazil's distress in 2002-03. Results are related to the observation that preemptive restructurings are now more common than straight defaults in sovereign bond markets and that this leads to a decoupling of CDS and bond spreads.
