Nascent markets for credit derivatives and structured credit in Asia and the Pacific were poised for rapid growth when the global financial turmoil hit. While there has been no significant deterioration in the quality of the underlying names, credit markets in the region have been swept up in...

During the financial crisis, Korea responded to dislocations in the FX swap market by both drawing on its swap line with the Federal Reserve and using its own international reserves to provide dollars to domestic banks. We show that the Bank of Korea's use of the Fed swap line was very effective...

A measure of risk premium is derived from the comparison of spot and option prices across the US equity and eurodollar markets. Risk premia in both markets co-move with volatility risk. Option prices, however, seem to underreact to changes in return volatility forecasts.

Standardised loss tranches based on credit default swap (CDS) indices have increased liquidity in the market for credit risk correlations. Although progress is being made, quantitative modelling of these correlations is complex and not yet fully developed.

A model-based assessment of credit risk is subject to both specification and calibration errors. Focusing on a well known credit risk model, we propose a methodology for quantifying the relative importance of alternative sources of such errors and apply this methodology to a large data set. We...

Contractual terms related to the definition of trigger events and deliverable obligations on single-name CDSs are priced into CDS spreads. Pricing of the differences in contract terms appears to have generally converged over time, although there still seems to be evidence of a degree of regional...

Interest rate volatility, as implied by swaptions prices, rose in all major economic areas between 2001 and early 2004. The increase was particularly sharp for US rates and was more sizeable for short-term rates and swaptions with short expiration. Since the spring of 2004, US dollar...

Credit default swap (CDS) spreads compensate investors for expected loss, but they also contain risk premia because of investors' aversion to default risk. We estimate CDS risk premia and default risk aversion to have been highly volatile during 2002– 2005. Both measures appear to be related...

Economic derivatives allow traders to take direct positions on the outcomes of macroeconomic data releases. In contrast to survey-based measures, the prices of economic derivatives provide information on the entire probability distribution underlying these expectations, not just point estimates....

The ABX family of indices has become a key barometer of subprime mortgage market conditions during the recent financial crisis. Simple regression analysis illustrates the relationship between observed index returns and proxies of default risk, interest rates, market liquidity and risk appetite....