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Market Conditions Default Risk And Credit Spreads
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Book Synopsis Market Conditions, Default Risk and Credit Spreads by : Dragon Yongjun Tang
Download or read book Market Conditions, Default Risk and Credit Spreads written by Dragon Yongjun Tang and published by . This book was released on 2010 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study empirically examines the impact of the interaction between market and default risk on corporate credit spreads. Using credit default swap (CDS) spreads, we find that average credit spreads decrease in GDP growth rate, but increase in GDP growth volatility and jump risk in the equity market. At the market level, investor sentiment is the most important determinant of credit spreads. At the firm level, credit spreads generally rise with cash flow volatility and beta, with the effect of cash flow beta varying with market conditions. We identify implied volatility as the most significant determinant of default risk among firm-level characteristics. Overall, a major portion of individual credit spreads is accounted for by firm-level determinants of default risk, while macroeconomic variables are directly responsible for a lesser portion.
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 33 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.
Book Synopsis Market Conditions, Default Risk and Credit Spreads by : Dragon Yongjun Tang
Download or read book Market Conditions, Default Risk and Credit Spreads written by Dragon Yongjun Tang and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Empirical Comparison of Credit Spreads Between the Bond Market and the Credit Default Swap Market by : Haibin Zhu
Download or read book An Empirical Comparison of Credit Spreads Between the Bond Market and the Credit Default Swap Market written by Haibin Zhu and published by . This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 331 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.
Book Synopsis Credit Default Swap Spreads and Variance Risk Premia (VRP) by : Hao Wang
Download or read book Credit Default Swap Spreads and Variance Risk Premia (VRP) written by Hao Wang and published by DIANE Publishing. This book was released on 2011-04 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Risk: Modeling, Valuation and Hedging by : Tomasz R. Bielecki
Download or read book Credit Risk: Modeling, Valuation and Hedging written by Tomasz R. Bielecki and published by Springer Science & Business Media. This book was released on 2013-03-14 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: The motivation for the mathematical modeling studied in this text on developments in credit risk research is the bridging of the gap between mathematical theory of credit risk and the financial practice. Mathematical developments are covered thoroughly and give the structural and reduced-form approaches to credit risk modeling. Included is a detailed study of various arbitrage-free models of default term structures with several rating grades.
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.
Book Synopsis Completing the Market: Generating Shadow CDS Spreads by Machine Learning by : Nan Hu
Download or read book Completing the Market: Generating Shadow CDS Spreads by Machine Learning written by Nan Hu and published by International Monetary Fund. This book was released on 2019-12-27 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compared the predictive performance of a series of machine learning and traditional methods for monthly CDS spreads, using firms’ accounting-based, market-based and macroeconomics variables for a time period of 2006 to 2016. We find that ensemble machine learning methods (Bagging, Gradient Boosting and Random Forest) strongly outperform other estimators, and Bagging particularly stands out in terms of accuracy. Traditional credit risk models using OLS techniques have the lowest out-of-sample prediction accuracy. The results suggest that the non-linear machine learning methods, especially the ensemble methods, add considerable value to existent credit risk prediction accuracy and enable CDS shadow pricing for companies missing those securities.
Book Synopsis Correlation in Credit Risk by : Xiaoling Pu
Download or read book Correlation in Credit Risk written by Xiaoling Pu and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The negative basis - Credit Default Swap contracts and credit risk during the financial crisis by : Matthias Schnare
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 89 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
Book Synopsis Credit Derivative Strategies by : Rohan Douglas
Download or read book Credit Derivative Strategies written by Rohan Douglas and published by John Wiley and Sons. This book was released on 2010-05-13 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the decade since the credit derivatives market started, financial professionals have become increasingly sophisticated. Most books on the subject have not kept pace. Credit Derivative Strategies closes the gap with state-of-the-art techniques for picking credit hedge funds, analyzing event risk, identifying relative value opportunities and managing CDOs. The credit crisis has many people in the financial industry rethinking how to manage their credit risk and exposure. It is now more important than ever for participants in the financial markets -- whether they are trading or not -- to understand these credit products given their increasing impact. The contributors to this book are practicing professionals who honed their craft at some of the industry's most successful companies including: Merrill Lynch, Credit Suisse First Boston, Kenmar Global Investment Management, and Citigroup.
Book Synopsis Corporate Yield Spreads by : Francis A. Longstaff
Download or read book Corporate Yield Spreads written by Francis A. Longstaff and published by . This book was released on 2004 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the definition of the riskless curve. We also find that the nondefault component is time varying and strongly related to measures of bond-specific illiquidity as well as to macroeconomic measures of bond-market liquidity.
Book Synopsis Liquidity and Asset Prices by : Yakov Amihud
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Download or read book Credit Risk written by Niklas Wagner and published by CRC Press. This book was released on 2008-05-28 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt: Featuring contributions from leading international academics and practitioners, Credit Risk: Models, Derivatives, and Management illustrates how a risk management system can be implemented through an understanding of portfolio credit risks, a set of suitable models, and the derivation of reliable empirical results. Divided into six sectio
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 Explaining Credit Default Swap Spreads with Equity Volatility and Jump Risks of Individual Firms by : Yibin Zhang
Download or read book Explaining Credit Default Swap Spreads with Equity Volatility and Jump Risks of Individual Firms written by Yibin Zhang and published by . This book was released on 2005 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
