A New Concept Of Credit Spread For Defaultable Bond Pricing

Download A New Concept Of Credit Spread For Defaultable Bond Pricing full books in PDF, epub, and Kindle. Read online A New Concept Of Credit Spread For Defaultable Bond Pricing ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!

A New Concept of Credit Spread for Defaultable Bond Pricing

Download A New Concept of Credit Spread for Defaultable Bond Pricing PDF Online Free

Author : Yunkang Liu
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)

Book Synopsis A New Concept of Credit Spread for Defaultable Bond Pricing by : Yunkang Liu

Download or read book A New Concept of Credit Spread for Defaultable Bond Pricing written by Yunkang Liu and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new concept of credit spread for defaultable bond pricing is introduced in this paper. When combined with the corresponding survival-based pricing model, it allows fixed income portfolio consists of bonds and credit default swaps to be managed consistently in terms of default and credit spread risks. Compared with industry standard credit spreads such as yield spread, G-spread and I-spread, the new credit spread provides a better way for market participants to exchange pricing information since spread differentials between bonds with similar maturities but different coupons can be reduced or better explained. For market participants using industry standard credit spreads, a model based spread adjustment between bonds with similar maturities but different coupons is discussed. Formulae that are suitable for back-of-the-envelop calculation are derived and tested with examples.

Endogenous Default, Bond Pricing and Term Structure of Credit Spread Under Stochastic Volatility

Download Endogenous Default, Bond Pricing and Term Structure of Credit Spread Under Stochastic Volatility PDF Online Free

Author : Yanping Pan
Publisher :
ISBN 13 : 9780542895319
Total Pages : 214 pages
Book Rating : 4.8/5 (953 download)

Book Synopsis Endogenous Default, Bond Pricing and Term Structure of Credit Spread Under Stochastic Volatility by : Yanping Pan

Download or read book Endogenous Default, Bond Pricing and Term Structure of Credit Spread Under Stochastic Volatility written by Yanping Pan and published by . This book was released on 2006 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that the presence of a short time scale in the volatility process has a significant effect on the valuation of debt, the credit yield spread and the cumulative default probability. We argue that combining endogenous default modelling with stochastic volatility produces realistic results.

Modeling Credit Risk and Pricing Credit Derivatives

Download Modeling Credit Risk and Pricing Credit Derivatives PDF Online Free

Author : Martin P. Wolf
Publisher : Universal-Publishers
ISBN 13 : 1581121458
Total Pages : 142 pages
Book Rating : 4.5/5 (811 download)

Book Synopsis Modeling Credit Risk and Pricing Credit Derivatives by : Martin P. Wolf

Download or read book Modeling Credit Risk and Pricing Credit Derivatives written by Martin P. Wolf and published by Universal-Publishers. This book was released on 2002-02-17 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis starts with a short description of the credit derivatives' place in the credit risk management. Then it proceeds by outlining the basic forms of credit derivatives, their applications, and their contract elements. A short description of the two common pricing frameworks for credit derivatives, the Firm's Value Models and the Credit Rating Transition Models is given. The major approach reviewed in this thesis is the one of Duffie-Singleton for valuing credit derivatives with term structure models. This framework is also applied in a simulation and examines the importance of the different parameters on the outcome. Also examples for the valuation of Default Digital Swaps and Puts as well as Credit Default Swaps and Puts are given.

A Tree Implementation of a Credit Spread Model for Credit Derivatives

Download A Tree Implementation of a Credit Spread Model for Credit Derivatives PDF Online Free

Author : Philipp Schönbucher
Publisher :
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.:/5 (129 download)

Book Synopsis A Tree Implementation of a Credit Spread Model for Credit Derivatives by : Philipp Schönbucher

Download or read book A Tree Implementation of a Credit Spread Model for Credit Derivatives written by Philipp Schönbucher and published by . This book was released on 2000 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we present a tree model for defaultable bond prices which can be used for the pricing of credit derivatives. The model is based upon the two-factor Hull-White (1994) model for default-free interest rates, where one of the factors is taken to be the credit spread of the defaultable bond prices. As opposed to the tree model of Jarrow and Turnbull (1992), the dynamics of default-free interest rates and credit spreads in this model can have any desired degree of correlation, and the model can be fitted to any given term structures of default-free and defaultable bond prices, and to the term structures of the respective volatilities. Furthermore the model can accommodate several alternative models of default recovery, including the fractional recovery model of Duffie and Singleton (1994) and recovery in terms of equivalent default-free bonds (see e.g. Lando (1998)). Although based on a Gaussian setup, the approach can easily be extended to non-Gaussian processes that avoid negative interest-rates or credit spreads.

First Passage and Excursion Time Models for Valuing Defaultable Bonds

Download First Passage and Excursion Time Models for Valuing Defaultable Bonds PDF Online Free

Author : Martina Nardon
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (129 download)

Book Synopsis First Passage and Excursion Time Models for Valuing Defaultable Bonds by : Martina Nardon

Download or read book First Passage and Excursion Time Models for Valuing Defaultable Bonds written by Martina Nardon and published by . This book was released on 2009 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this contribution, we study structural models of defaultable bond pricing in which default occurs at the first time a relevant process either reaches the default boundary or has spent continuously (or cumulatively) a fixed time period below that threshold. Unlike first-passage time approaches, excursion time models allow for a non-absorbing state of default. Both the first-passage time and the excursion time approaches can be generalized by defining the default time as the first instant at which the firm value process (or another signaling process) either remains a certain time below the default threshold or hits a lower barrier. This corresponds, for instance, to a situation in which a firm is allowed temporarily to be short of funds, but enters default immediately when the financial distress becomes severe. Moreover, we examine the effects of different default time specifications on bond prices and credit spreads.

Credit Risk Pricing Models

Download Credit Risk Pricing Models PDF Online Free

Author : Bernd Schmid
Publisher : Springer Science & Business Media
ISBN 13 : 3540247165
Total Pages : 388 pages
Book Rating : 4.5/5 (42 download)

Book Synopsis Credit Risk Pricing Models by : Bernd Schmid

Download or read book Credit Risk Pricing Models written by Bernd Schmid and published by Springer Science & Business Media. This book was released on 2012-11-07 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit Risk Pricing Models - now in its second edition - gives a deep insight into the latest basic and advanced credit risk modelling techniques covering not only the standard structural, reduced form and hybrid approaches but also showing how these methods can be applied to practice. The text covers a broad range of financial instruments, including all kinds of defaultable fixed and floating rate debt, credit derivatives and collateralised debt obligations.This volume will be a valuable source for the financial community involved in pricing credit linked financial instruments. In addition, the book can be used by students and academics for a comprehensive overview of the most important credit risk modelling issues.

Default Implied Volatility for Credit Spread

Download Default Implied Volatility for Credit Spread PDF Online Free

Author : C.K. Zheng
Publisher :
ISBN 13 :
Total Pages : 22 pages
Book Rating : 4.:/5 (129 download)

Book Synopsis Default Implied Volatility for Credit Spread by : C.K. Zheng

Download or read book Default Implied Volatility for Credit Spread written by C.K. Zheng and published by . This book was released on 1999 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a simple reduced-form approach to pricing credit derivatives. The definition of default is purely based on the market value of a risky bond and its potential recovery value. A risky bond is treated as a riskless bond with an embedded short position on a barrier option. The risky bond market implicitly prices this barrier option. The default implied volatility (DIV) curve for credit spread is derived from the values of barrier options. The DIV curve is useful for pricing volatility-sensitive credit derivatives. In this paper, we show how the DIV curve is used to consistently price a credit spread put option and a first-to-default swap. The correlation matrix of reference entities' credit spreads (not default arrival times) is used for pricing a first-to-default swap.

Credit Risk

Download Credit Risk PDF Online Free

Author : Darrell Duffie
Publisher : Princeton University Press
ISBN 13 : 1400829178
Total Pages : 415 pages
Book Rating : 4.4/5 (8 download)

Book Synopsis Credit Risk by : Darrell Duffie

Download or read book Credit Risk written by Darrell Duffie and published by Princeton University Press. This book was released on 2012-01-12 with total page 415 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book, two of America's leading economists provide the first integrated treatment of the conceptual, practical, and empirical foundations for credit risk pricing and risk measurement. Masterfully applying theory to practice, Darrell Duffie and Kenneth Singleton model credit risk for the purpose of measuring portfolio risk and pricing defaultable bonds, credit derivatives, and other securities exposed to credit risk. The methodological rigor, scope, and sophistication of their state-of-the-art account is unparalleled, and its singularly in-depth treatment of pricing and credit derivatives further illuminates a problem that has drawn much attention in an era when financial institutions the world over are revising their credit management strategies. Duffie and Singleton offer critical assessments of alternative approaches to credit-risk modeling, while highlighting the strengths and weaknesses of current practice. Their approach blends in-depth discussions of the conceptual foundations of modeling with extensive analyses of the empirical properties of such credit-related time series as default probabilities, recoveries, ratings transitions, and yield spreads. Both the "structura" and "reduced-form" approaches to pricing defaultable securities are presented, and their comparative fits to historical data are assessed. The authors also provide a comprehensive treatment of the pricing of credit derivatives, including credit swaps, collateralized debt obligations, credit guarantees, lines of credit, and spread options. Not least, they describe certain enhancements to current pricing and management practices that, they argue, will better position financial institutions for future changes in the financial markets. Credit Risk is an indispensable resource for risk managers, traders or regulators dealing with financial products with a significant credit risk component, as well as for academic researchers and students.

Explaining the Level of Credit Spreads

Download Explaining the Level of Credit Spreads PDF Online Free

Author : Martijn Cremers
Publisher :
ISBN 13 :
Total Pages : 58 pages
Book Rating : 4.3/5 ( download)

Book Synopsis Explaining the Level of Credit Spreads by : Martijn Cremers

Download or read book Explaining the Level of Credit Spreads written by Martijn Cremers and published by . This book was released on 2005 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prices of equity index put options contain information on the price of systematic downward jump risk. We use a structural jump-diffusion firm value model to assess the level of credit spreads that is generated by option-implied jump risk premia. In our compound option pricing model, an equity index option is an option on a portfolio of call options on the underlying firm values. We calibrate the model parameters to historical information on default risk, the equity premium and equity return distribution, and S & P 500 index option prices. Our results show that a model without jumps fails to fit the equity return distribution and option prices, and generates a low out-of-sample prediction for credit spreads. Adding jumps and jump risk premia improves the fit of the model in terms of equity and option characteristics considerably and brings predicted credit spread levels much closer to observed levels.

The Credit Spread Puzzle

Download The Credit Spread Puzzle PDF Online Free

Author : Jeffery D. Amato
Publisher :
ISBN 13 :
Total Pages : 14 pages
Book Rating : 4.:/5 (13 download)

Book Synopsis The Credit Spread Puzzle by : Jeffery D. Amato

Download or read book The Credit Spread Puzzle written by Jeffery D. Amato and published by . This book was released on 2014 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spreads on corporate bonds tend to be many times wider than what would be implied by expected default losses alone. These spreads are the difference between yields on corporate debt subject to default risk and government bonds free of such risk.2 While credit spreads are often generally understood as the compensation for credit risk, it has been difficult to explain the precise relationship between spreads and such risk. In 1997-2003, for example, the average spread on BBB-rated corporate bonds with three to five years to maturity was about 170 basis points at annual rates. Yet, during the same period, the average yearly loss from default amounted to only 20 basis points.In this case, the spread was more than eight times the expected loss from default. The wide gap between spreads and expected default losses is what we call the credit spread puzzle. In this article we argue that the answer to the credit spread puzzle might lie in the difficulty of diversifying default risk. Most studies to date have implicitly assumed that investors can diversify away the unexpected losses in a corporate bond portfolio. However, the nature of default risk is such that the distribution of returns on corporate bonds is highly negatively skewed. Such skewness would require an extraordinarily large portfolio to achieve full diversification. Evidence from the market for collateralised debt obligations (CDOs) indicates that in practice such large portfolios are unattainable, and thus unexpected losses are unavoidable. Hence, we argue that spreads are so wide because they are pricing undiversified credit risk. We first review the existing evidence on the determinants of credit spreads, including the role of taxes, risk premia and liquidity premia. We then discuss the role of unexpected losses and the difficulties involved in diversifying credit portfolios, drawing on evidence from the CDO market.

A Jump-diffusion Approach to Modeling Credit Risk and Valuing Defaultable Securities

Download A Jump-diffusion Approach to Modeling Credit Risk and Valuing Defaultable Securities PDF Online Free

Author : Chunsheng Zhou
Publisher :
ISBN 13 :
Total Pages : 64 pages
Book Rating : 4.E/5 ( download)

Book Synopsis A Jump-diffusion Approach to Modeling Credit Risk and Valuing Defaultable Securities by : Chunsheng Zhou

Download or read book A Jump-diffusion Approach to Modeling Credit Risk and Valuing Defaultable Securities written by Chunsheng Zhou and published by . This book was released on 1997 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Two Essays on Corporate Bonds Credit Spreads

Download Two Essays on Corporate Bonds Credit Spreads PDF Online Free

Author : Siamak (Hossein) Javadi Asl
Publisher :
ISBN 13 :
Total Pages : 173 pages
Book Rating : 4.:/5 (932 download)

Book Synopsis Two Essays on Corporate Bonds Credit Spreads by : Siamak (Hossein) Javadi Asl

Download or read book Two Essays on Corporate Bonds Credit Spreads written by Siamak (Hossein) Javadi Asl and published by . This book was released on 2014 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract Essay1: This paper examines joint default risk and its bond pricing implications. Constructing a measure of default correlation from CDS data, we show that default correlation is priced in bond market. Default correlation is more pronounced during periods of financial distress and for speculative issues. Also, consistent with theory, we establish a link between default correlation, secondary bond market liquidity, and the overall economic condition. Deterioration in secondary bond market liquidity raises the default boundary across the board and triggers default correlation. Our results provide a direct evidence for an intricate interaction between default risk premium and liquidity risk premium and have significant risk management and policy implications.

The Handbook of Structured Finance, Chapter 3 - Univariate Credit Risk Pricing

Download The Handbook of Structured Finance, Chapter 3 - Univariate Credit Risk Pricing PDF Online Free

Author : Arnaud de Servigny
Publisher : McGraw Hill Professional
ISBN 13 : 0071715703
Total Pages : 49 pages
Book Rating : 4.0/5 (717 download)

Book Synopsis The Handbook of Structured Finance, Chapter 3 - Univariate Credit Risk Pricing by : Arnaud de Servigny

Download or read book The Handbook of Structured Finance, Chapter 3 - Univariate Credit Risk Pricing written by Arnaud de Servigny and published by McGraw Hill Professional. This book was released on 2007-01-22 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This chapter comes from the book The Handbook of Structured Finance, a complete guide to the major issues facing investors in the structured finance market. Comprehensive and accessible, it provides the latest techniques for measuring and managing risk, finding optimum pricing, and taking advantage of leverage and market incompleteness, as well as models for debt and equity modeling.

The Handbook of Convertible Bonds

Download The Handbook of Convertible Bonds PDF Online Free

Author : Jan De Spiegeleer
Publisher : John Wiley & Sons
ISBN 13 : 1119978068
Total Pages : 400 pages
Book Rating : 4.1/5 (199 download)

Book Synopsis The Handbook of Convertible Bonds by : Jan De Spiegeleer

Download or read book The Handbook of Convertible Bonds written by Jan De Spiegeleer and published by John Wiley & Sons. This book was released on 2011-07-07 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a complete guide to the pricing and risk management of convertible bond portfolios. Convertible bonds can be complex because they have both equity and debt like features and new market entrants will usually find that they have either a knowledge of fixed income mathematics or of equity derivatives and therefore have no idea how to incorporate credit and equity together into their existing pricing tools. Part I of the book covers the impact that the 2008 credit crunch has had on the markets, it then shows how to build up a convertible bond and introduces the reader to the traditional convertible vocabulary of yield to put, premium, conversion ratio, delta, gamma, vega and parity. The market of stock borrowing and lending will also be covered in detail. Using an intuitive approach based on the Jensen inequality, the authors will also show the advantages of using a hybrid to add value - pre 2008, many investors labelled convertible bonds as 'investing with no downside', there are of course plenty of 2008 examples to prove that they were wrong. The authors then go onto give a complete explanation of the different features that can be embedded in convertible bond. Part II shows readers how to price convertibles. It covers the different parameters used in valuation models: credit spreads, volatility, interest rates and borrow fees and Maturity. Part III covers investment strategies for equity, fixed income and hedge fund investors and includes dynamic hedging and convertible arbitrage. Part IV explains the all important risk management part of the process in detail. This is a highly practical book, all products priced are real world examples and numerical examples are not limited to hypothetical convertibles. It is a must read for anyone wanting to safely get into this highly liquid, high return market.

Currency Dependence of Corporate Credit Spreads

Download Currency Dependence of Corporate Credit Spreads PDF Online Free

Author : Rainer Jankowitsch
Publisher :
ISBN 13 :
Total Pages : 29 pages
Book Rating : 4.:/5 (129 download)

Book Synopsis Currency Dependence of Corporate Credit Spreads by : Rainer Jankowitsch

Download or read book Currency Dependence of Corporate Credit Spreads written by Rainer Jankowitsch and published by . This book was released on 2003 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many pricing and risk management models need credit spread curves as an input. In the corporate bond market the estimation of credit spread curves is not trivial. Most issuers have only too few bonds outstanding and frequently these bonds are denominated in different currencies. To ensure a sufficient number of bonds for the estimation procedure in many cases bonds in different currencies have to be used which implies that the estimation procedure has to take into account potential currency effects. Under the hypothesis of zero correlation between the default variables and the exchange rates deflated by the relevant money market accounts we show using a rather general pricing framework that credit spreads are expected to be equal across different currencies. This paper analyses these effects and presents a new model which allows to estimate a credit spread curve for a single issuer with bonds in different currencies. This new model is based on the multi-curve estimation approach which allows a parsimonious joint estimation of a risk free term structure and the credit spread curve of the issuer. We reject the hypothesis of zero correlation between credit and exchange rate risk and present empirical evidence that there are significant differences of issuer specific credit spreads across different currencies in a representative sample of international corporate bonds. Moreover, this implies that dollar related credit spread curves cannot be used without special care for pricing defaultable claims denominated in other currencies.

Investing in Corporate Bonds and Credit Risk

Download Investing in Corporate Bonds and Credit Risk PDF Online Free

Author : F. Hagenstein
Publisher : Springer
ISBN 13 : 0230523293
Total Pages : 355 pages
Book Rating : 4.2/5 (35 download)

Book Synopsis Investing in Corporate Bonds and Credit Risk by : F. Hagenstein

Download or read book Investing in Corporate Bonds and Credit Risk written by F. Hagenstein and published by Springer. This book was released on 2004-10-01 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

US Banking Deregulation, Small Businesses and Interstate Insurance of Personal Income

Download US Banking Deregulation, Small Businesses and Interstate Insurance of Personal Income PDF Online Free

Author : Yuliya Demyanyk
Publisher :
ISBN 13 : 9788275533621
Total Pages : 0 pages
Book Rating : 4.5/5 (336 download)

Book Synopsis US Banking Deregulation, Small Businesses and Interstate Insurance of Personal Income by : Yuliya Demyanyk

Download or read book US Banking Deregulation, Small Businesses and Interstate Insurance of Personal Income written by Yuliya Demyanyk and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: