There has been heated debate regarding credit-rating agencies' (CRAs') reporting accuracy of corporate credit ratings, which is essential for investors because they rely on those crediting ratings to make investment decisions. We estimate the reporting accuracy using the data on corporate...

We develop a four-factor model intended to capture size, value, and credit rating transition patterns in excess returns for a panel of predominantly mid- and large-cap entities. Using credit transition matrices and rating histories from 48 US issuers, we provide evidence to support a...

The dependency of the individual default behavior of a firm on the state of the credit cycle is widely implemented in credit portfolio models and ultimately reflected in the Basel II one-factor model determining capital requirements. Despite this, macroeconomic variables able to represent this...

We develop a four-factor model intended to capture size, value, and credit rating transition patterns in excess returns for a panel of predominantly mid- and large-cap entities. Using credit transition matrices and rating histories from 48 US issuers, we provide evidence to support a...

Expectations of risky bond payments are unobservable and recovery rates for sovereigns are hard to estimate because they have no contractual claims to defined assets and samples of defaults are limited. A geometric version of credit spread is used to derive expected payments, dependent on...

This paper analyzes the interdealer-broker market for single-name Credit Default Swaps (CDSs) using a novel dataset from the GFI trading platform. We find that CDSs exhibit reverse J-shaped patterns for trading and quoting activity in the U.S., and U-shaped patterns in Europe and Japan. We also...

This paper presents a new statistical arbitrage test which has lower Type I error and selects arbitrage opportunities with lower downside risk than existing alternatives. The test is applied to credit derivatives markets using strategies combining Credit Default Swaps and Asset Swaps. Using four...

This study aims to investigate the existence of contagion between liquid and illiquid assets in the credit default swap (CDS) market around the recent financial crisis. The authors perform analyses based on vector autoregression model and the dynamic conditional correlation model. The estimation...

This paper provides evidence for regulatory arbitrage within the class of assetbacked securities (ABS) based on individual asset holding data of German banks. I find that those banks operating with tight regulatory constraints pick the securities with the highest yield and lowest collateral...