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Trading the bond-CDS basis: The role of credit risk and liquidity

Trapp, Monika - 2009

We analyze trading opportunities that arise from differences between the bond and the CDS market. By simultaneously … entering a position in a CDS contract and the underlying bond, traders can build a default-risk free position that allows them … to repeatedly earn the difference between the bond asset swap spread and the CDS, known as the basis. We show that the …

Persistent link: https://www.econbiz.de/10010302537

The valuation of corporate liabilities: Theory and tests

Ericsson, Jan; Reneby, Joel - 2001

We develop a structural bond pricing approach and implement it on a large panel of US industrial bonds using an … form models. Furthermore, our analysis provide evidence that bond yield spreads incorporate a substantial liquidity …

Persistent link: https://www.econbiz.de/10010281391

Assessing the compensation for volatility risk implicit in interest rate derivatives

Fornari, Fabio - 2008

Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...

Persistent link: https://www.econbiz.de/10011604905

How has CDO market pricing changed during the turmoil? Evidence from CDS index tranches

Scheicher, Martin - 2008

This paper applies regression analysis to investigate the fundamental factors of the variation of CDS index tranches. The sample comprises daily data on the tranche premia of the European iTraxx and North American CDX index from the start of the market in summer 2004 to January 2008. I estimate...

Persistent link: https://www.econbiz.de/10011604956

Liquidität, Risikoeinstellung des Kapitalmarktes und Konjunkturerwartung als Preisdeterminanten von Collateralized Debt Obligations (CDOs) - Eine simulationsgestützte Analyse

Gann, Philipp - 2009

Gegenstand der vorliegenden Arbeit ist die Analyse des Einflusses der Faktoren Konjunkturerwartung, Risikoaversion des Kapitalmarktes und Liquidität auf die Marktwerte von Collateralized Debt Obligations (CDOs) verschiedener Seniorität. Es wird gezeigt, dass die Marktwerte von CDOs wesentlich...

Persistent link: https://www.econbiz.de/10010427771

Credit gap risk in a first passage time model with jumps

Packham, Natalie; Schlögl, Lutz; Schmidt, Wolfgang M. - 2009

The payoff of many credit derivatives depends on the level of credit spreads. In particular, credit derivatives with a leverage component are subject to gap risk, a risk associated with the occurrence of jumps in the underlying credit default swaps. In the framework of first passage time models,...

Persistent link: https://www.econbiz.de/10010301707

Credit dynamics in a first passage time model with jumps

Packham, Natalie; Schlögl, Lutz; Schmidt, Wolfgang M. - 2009

The payoff of many credit derivatives depends on the level of credit spreads. In particular, the payoff of credit derivatives with a leverage component is sensitive to jumps in the underlying credit spreads. In the framework of first passage time models we extend the model introduced in...

Persistent link: https://www.econbiz.de/10010301718

Broker-dealer risk appetite and commodity returns

Etula, Erkko - 2010

This paper shows that the risk-bearing capacity of U.S. securities brokers and dealers is a strong determinant of risk premia in commodity markets. Commodity derivatives are the principal instrument used by producers and consumers of commodities to hedge against commodity price risk....

Persistent link: https://www.econbiz.de/10010287180

A diffusion approximation for the riskless profit under selling of discrete time call options

Nagaev, Sergei A. - 2003

A discrete time model of a financial market is considered. We focus on the study of a guaranteed profit of an investor which arises when the stock price jumps are bounded. The limit distribution of the profit as the model becomes closer to the classical model of the geometric Brownian motion is...

Persistent link: https://www.econbiz.de/10010292785

Stochastic modeling of private equity: an equilibrium based approach to fund valuation

Buchner, Axel; Kaserer, Christoph; Wagner, Niklas - 2006

In this paper, we present a new approach to measure the returns of private equity investments based on a stochastic model of the dynamics of a private equity fund. Our stochastic model of a private equity fund consists of two independent stages: the stochastic model of the capital drawdowns and...

Persistent link: https://www.econbiz.de/10010305730

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