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Credit Default Swaps in General Equilibrium : Spillovers, Credit Spreads, and Endogenous Default
Darst, Matthew - 2016
This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First … those that are not CDS reference entities. Second, when firms internalize the credit spread changes, the incentive to issue …
Persistent link: https://www.econbiz.de/10012992726
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Credit Default Swap Spreads and Variance Risk Premia
Zhou, Hao - 2011
We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a...
Persistent link: https://www.econbiz.de/10013118597
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Counterparty risk and counterparty choice in the credit default swap market
Du, Wenxin; Gadgil, Salil; Gordy, Michael B.; Vega, Clara - 2016
trade repository data on single-name credit default swap (CDS) transactions. We find that counterparty risk has a modest … impact on the pricing of CDS contracts, but a large impact on the choice of counterparties. We show that market participants … of central clearing on CDS pricing. Contrary to the previous literature, but consistent with our main findings on pricing …
Persistent link: https://www.econbiz.de/10011578787
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Macro risks and the term structure of interest rates
Bekaert, Geert; Engstrom, Eric; Ermolov, Andrey - 2017
We use non-Gaussian features in U.S. macroeconomic data to identify aggregate supply and demand shocks while imposing minimal economic assumptions. Recessions in the 1970s and 1980s were driven primarily by supply shocks, later recessions were driven primarily by demand shocks, and the Great...
Persistent link: https://www.econbiz.de/10011709342
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Cointegration Test with Stationary Covariates and the CDS-Bond Basis During the Financial Crisis
Wu, Jason - 2011
. The new test is used to test for cointegration between Credit Default Swap (CDS) and corporate bond spreads for a panel of …
Persistent link: https://www.econbiz.de/10013127087
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Information in yield spread trades
Park, Yang-Ho - 2019
Using positions data on bond futures, I document that speculators' spread trades contain private information about future economic activities and asset prices. Strong steepening trades are associated with negative payroll surprises in subsequent months and can predict asset markets' reaction to...
Persistent link: https://www.econbiz.de/10012018461
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Investment commonality across insurance companies : fire sale risk and corporate yield spreads
Nanda, Vikram; Wu, Wei; Zhou, Xing - 2017
Insurance companies often follow highly correlated investment strategies. As major investors in corporate bonds, their investment commonalities subject investors to fire-sale risk when regulatory restrictions prompt widespread divestment of a bond following a rating downgrade. Reflective of...
Persistent link: https://www.econbiz.de/10011710064
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Expectations of Functions of Stochastic Time with Application to Credit Risk Modeling
Costin, Ovidiu - 2013
We develop two novel approaches to solving for the Laplace transform of a time-changed stochastic process. We discard the standard assumption that the background process (X<sub>t</sub>) is Levy. Maintaining the assumption that the business clock (T<sub>t</sub>) and the background process are independent, we develop...
Persistent link: https://www.econbiz.de/10013083784
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Volatility of Volatility and Tail Risk Premiums
Park, Yang-Ho - 2013
This paper reports on tail risk premiums in two tail risk hedging strategies: the S&P 500 puts and the VIX calls. As a new measure of tail risk, we suggest using a model-free, risk-neutral measure of the volatility of volatility implied by a cross section of the VIX options, which we call the...
Persistent link: https://www.econbiz.de/10013074319
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An Empirical Test of Auction Efficiency : Evidence from MBS Auctions of the Federal Reserve
Bonaldi, Pietro - 2015
Auction theory has ambiguous implications regarding the relative efficiency of three formats of multiunit auctions: uniform-price, discriminatory-price, and Vickrey auctions. We empirically evaluate the performance of these three auction formats using the bid-level data of the Federal Reserve's...
Persistent link: https://www.econbiz.de/10013015085