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An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - EconWPA - 2001

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for...

Persistent link: https://www.econbiz.de/10005413092

Simulation-Based Pricing of Convertible Bonds

Ammann, Manuel; Kind, Axel; Wilde, Christian - EconWPA - 2005

We propose and empirically study a pricing model for convertible bonds based on Monte Carlo simulation. The method uses … parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the … pricing study of the US market, using 32 convertible bonds and 69 months of daily market prices. Our results do not confirm …

Persistent link: https://www.econbiz.de/10005413169

The Valuation of Inflation-Indexed and FX Convertible Bonds

Landskroner, Yoram; Raviv, Alon - EconWPA - 2004

important subgroup is convertibles linked to a price index or exchange rate. In this paper we extend the convertible pricing … establish upper and lower bounds for the price of the indexed convertible. We approximate the pricing equations by using …, we demonstrate the usefulnes and the limitations of the pricing model by using convertible traded on the Tel- Aviv stock …

Persistent link: https://www.econbiz.de/10005561658

Mark-up and Capital Structure of the Firm facing Uncertainty

Chatelain - EconWPA - 2004

This note shows that, with pre-set price and capital decisions of firms facing uncertainty and financial market imperfections, price, mark up and the expected degree of capacity utilization (resp. capital) decreases (resp. increases) with the firm internal net worth.

Persistent link: https://www.econbiz.de/10005134898

Bank Stability and Market Discipline: Debt-for-Equity Swap versus Subordinated Notes

Raviv, Alon - EconWPA - 2004

Several studies have recommended reliance on subordinated debt as a tool for monitoring banks by investors and for enhancing depositors’ protection. However, subordinated debenture increases the level of leverage and thus the probability of costly failure. We propose a novel financial...

Persistent link: https://www.econbiz.de/10005413031

Is Liquidity Reflected in Bond Yields? Evidence from the Euro Corporate Bond Market

Houweling, Patrick; Mentink, Albert; Vorst, Ton - EconWPA - 2002

We test whether liquidity is priced in the euro-denominated corporate bond market. We use the Arbitrage Pricing Theory … significant pricing anomalies due to liquidity exist for euro- denominated bonds. We find that the yield premium between liquid …

Persistent link: https://www.econbiz.de/10005413035

International Diversification Benefits in ASEAN Stock Markets: a Revisit

Lim, Kian-Ping; Lee, Hock-Ann; Liew, Venus Khim-Sen - EconWPA - 2003

With plentiful of evidence supporting the presence of non-linearity in stock returns series, coupled with theoretical and empirical works suggesting a potential loss in standard Johansen cointegration method if the underlying data generating process is non-linear in nature, this study...

Persistent link: https://www.econbiz.de/10005413036

Tradable Schemes

Hoogland, Jiri; Neumann, Dimitri - EconWPA - 2001

our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite … difference scheme to exact solutions of the pricing PDE. This can be done in a very elegant way, due to the fact that in our … computer and to ~0.001% in a second. The scheme can also be used for market conform pricing, by fitting it to observed option …

Persistent link: https://www.econbiz.de/10005413042

Innovation and Market Value

Hall, Bronwyn H. - EconWPA - 1999

This paper surveys recent findings about how the financial markets value the knowledge assets of publicly traded firms. The motivation for using market value equation to price knowledge assets is discusssed and the theory behind this equation is briefly presented. Then the empirical literature...

Persistent link: https://www.econbiz.de/10005413048

Association between Markov regime-switching market volatility and beta risk: Evidence from Dow Jones industrial securities

Galagedera, Don U.A.; Shami, Roland - EconWPA - 2004

In this paper, the volatility of the return generating process of the market portfolio and the slope coefficient of the market model is assumed to follow a Markov switching process of order one. The results indicate very strong evidence of volatility switching behaviour in a sample of returns in...

Persistent link: https://www.econbiz.de/10005413049