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Give Credit Where Credit is Due : What Explains Corporate Bond Returns?

Israelov, Roni - 2019

particular, I find that options markets explain a great deal of credit returns. Two particular features of corporate bonds … call provisions, which are basically options granted to the bond issuer. Thus, callable corporate bonds are positively … buying bonds and equities and by selling delta-neutralized equity index options and bond options. Risk-Efficient Credit …

Persistent link: https://www.econbiz.de/10012897157

Rating Agencies' Monitoring and Certification Services - Evidence from the Sovereign CDS Market

Kremser, Thomas Reinhard - 2014

This paper investigates the reaction of credit default swaps spreads to changes in rating class, outlook, and watchlist entries for sovereigns. We find a stronger response to negative outlook and watchlist changes than for actual rating class downgrades, which shows that negative outlook and...

Persistent link: https://www.econbiz.de/10013061155

A tree Implementation of a credit spread model for credit derivatives

Schönbucher, Philipp J. - 2000 - This version June 1999

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...

Persistent link: https://www.econbiz.de/10011538904

Factor models for portofolio credit risk

Schönbucher, Philipp J. - 2000

This paper gives a simple introduction to portfolio credit risk models of the factor model type. In factor models, the dependence between the individual defaults is driven by a small number of systematic factors. When conditioning on the realisation of these factors the defaults become...

Persistent link: https://www.econbiz.de/10011539945

Market discipline through credit ratings and too-big-to-fail in banking?

Kolaric, Sascha; Kiesel, Florian; Ongena, Steven - 2017

Do credit ratings help enforce market discipline on banks? Analyzing a uniquely comprehensive dataset consisting of 1,081 rating change announcements for 154 international financial institutions between January 2004 and December 2015, we find that rating downgrades for internal reasons, such as...

Persistent link: https://www.econbiz.de/10011627047

Sovereign asset values and implications for the credit market : conference paper

Kalteier, Eva-Maria; Posch, Peter N. - 2013

Using the contingent claim approach and market data on sovereign credit default swaps we assess the drivers of a country s risk perception. Deriving market-based asset values for a set of advanced economies we gain insights into the capital markets perspectives on sovereign creditworthiness. We...

Persistent link: https://www.econbiz.de/10010338280

Does Using Time-Varying Target Leverage Ratios in Structural Credit Risk Models Improve Their Accuracy?

Hui, Cho-Hoi - 2012

Empirical findings and theoretical studies suggest that firms adjust toward time-varying target leverage ratios. This paper studies the performances of the default probabilities generated from two structural credit risk models (one with time-dependent leverage ratios and one with constant target...

Persistent link: https://www.econbiz.de/10012712833

Explaining Credit-Ratings through a Perpetual-Debt Structural Model

Barone, Gaia - 2020

In this article we calibrate a Perpetual-Debt Structural Model (PDSM) by using Moody's historical credit-ratings. In the PDSM, stocks are equivalent to a portfolio that contains a perpetual American option to default and bonds are perpetual securities whose face value plays the role of a...

Persistent link: https://www.econbiz.de/10012855791

The Impact of Credit Rating and Frequent Refinancing on Firm Value

Arnold, Sven - 2015

Rating affects corporate credit costs and leverage choices. Therefore, we develop a corporate valuation model where the choice of leverage is consistent with the implied cost of debt of the rating class. We explicitly model the trigger, the consequences, and the analytical probability of...

Persistent link: https://www.econbiz.de/10013036443

CVA and Wrong-Way Risk : A Model Comparison from a Measure Change Perspective

Vrins, Frédéric D. - 2014

This paper provides three contributions in the context of modeling wrong-way risk (WWR) in counterparty valuation adjustment. First, we show that WWR can be captured by computing unconditonal expectations in another measure. Second, a new dynamic approach called "conic martingale" is proposed,...

Persistent link: https://www.econbiz.de/10013043740

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