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Trading the bond-CDS basis: The role of credit risk and liquidity
Trapp, Monika - 2009
basis size is closely related to measures of company-specific credit risk and liquidity, and to market conditions. In … risk, liquidity, and market measures even more strongly than the basis itself, and we show which conditions make long and …
Persistent link: https://www.econbiz.de/10010302537
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Liquidity Risk of Corporate Bond Returns : A Conditional Approach
Acharya, Viral V. - 2012
We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the … period 1973-2007 in a regime switching model. In one regime, liquidity shocks have mostly insignificant effect on bond prices … default), suggest the existence of time-varying liquidity risk of corporate bond returns conditional on episodes of flight to …
Persistent link: https://www.econbiz.de/10013116102
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Futures Market Liquidity During the Financial Crisis
Furfine, Craig - 2012
This paper examines how liquidity in two actively traded futures markets was affected by the recent financial crisis … withdrawal of liquidity from Eurodollar futures markets, yet a far more muted response in the S&P 500 index futures contract. A … deeper investigation into high-frequency trading strategies finds that prior to the crisis, liquidity additions and …
Persistent link: https://www.econbiz.de/10013116793
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Forecasting Sovereign Default risk with Merton’s Model
Duyvesteyn, Johan G. - 2016
Merton's structural model for sovereigns is proven to be useful to analyze the default risk of a country. We are the first to investigate how fast CDS spreads react to changes in model inputs and outputs. CDS spread changes strongly correlate with exchange rate returns, which are an input to the...
Persistent link: https://www.econbiz.de/10013008626
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Predicting Corporate Bankruptcy Using the Framework of Leland-Toft : Evidence From U.S
Charalambous, Christakis - 2020
In this paper, we evaluate an alternative approach for bankruptcy prediction that measures the financial healthiness of firms that have coupon-paying debts. The approach is based on the framework of Leland and Toft (1996), which is an extension of a widely-used model; the Black-Scholes-Merton...
Persistent link: https://www.econbiz.de/10012850420
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Systemic default and return predictability in the stock and bond markets
Bao, Jack; Hou, Kewei; Zhang, Shaojun - 2016
Using a structural model of default, we construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. The systemic default measure spikes during recession...
Persistent link: https://www.econbiz.de/10011810905
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Trade credit and pricing : an empirical evaluation
Amberg, Niklas; Jacobson, Tor; Schedvin, Erik von - 2018
funding costs and counterparty risks. Our results thus demonstrate the importance of trade credit for price setting and show …
Persistent link: https://www.econbiz.de/10011857364
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Current and prospective estimate of counterparty risk through dynamic neural networks
Agnese, Alessio; Giribone, Pier Giuseppe; Querci, Francesca - In: Risk management magazine 17 (2022) 2, pp. 42-61
The estimate of the probability of default plays a central role for any financial entity that wants to have an overview of the risks of insolvency it may incur by having economic relations with counterparties. This study aims to analyze the calculation of such measure in the context of...
Persistent link: https://www.econbiz.de/10013501084
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The Forecasting Performance of German Stock Option Densities
Keller, Joachim; Glatzer, Ernst; Craig, Ben R.; … - 2003
In this paper we will be estimating risk-neutral densities (RND) for the largest euro area stock market (the index of which is the German DAX), reporting their statistical properties, and evaluating their forecasting performance. We have applied an innovative test procedure to a new, rich, and...
Persistent link: https://www.econbiz.de/10010295765
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Forecasting the price of crude oil via convenience yield predictions
Knetsch, Thomas A. - 2006
The paper develops an oil price forecasting technique which is based on the present value model of rational commodity pricing. The approach suggests shifting the forecasting problem to the marginal convenience yield which can be derived from the cost-of-carry relationship. In a recursive...
Persistent link: https://www.econbiz.de/10010295802