We consider modeling errors in the hedging of a portfolio composed from BBB-rated bonds. By doing this, we open a new perspective to the debate on the relationship between corporate bonds and CDS spreads. We find that in ordinary times the added value of indexlinked credit derivatives is very...

This paper analyzes the market architecture and common factors of emission reduction instruments in Europe and North America. Spot and futures prices across exchanges in Europe are cointegrated, but the futures curve beyond the calendar year evolves independently. Despite narrower spreads,...

One of the earliest signs of the financial crisis in summer 2007 was the plunge in the indicaaes compiled from credit default swaps (CDSs) on a basket of subprime backed bonds. Recently, the worsening situation in the emerging countries has been perceptible in the steep rise of CDS spreads on...

One of the earliest signs of the financial crisis in summer 2007 was the plunge in the indicaaes compiled from credit default swaps (CDSs) on a basket of subprimebacked bonds. Recently, the worsening situation in the emerging countries has been perceptible in the steep rise of CDS spreads on...

The aim of the present research is to provide a new CoCo bond pricing method to assist analyses of both equity investors and fixed income investors. For this reason, we develop models in terms of PDEs where the spatial variable is the underlying stock. By using these approaches, one will be able...

Contingent convertible capital (CoCo) is a debt instrument that converts to equity or is written off if the issuing bank fails to meet a distress threshold. The conversion increases the issuer's loss-absorption capacity, but results in wealth transfers between CoCo holders and shareholders,...

This article studies the economic factors behind corporate default risk premia in Europe during the period 2006–2010. We employ information embedded in Credit Default Swap (CDS) contracts to quantify expected excess returns from the underlying bonds in market-wide default circumstances. We...

We study how shifting global macroeconomic conditions affect sovereign bond prices. Bondholders earn premia for two sources of systematic risk: exposure to low-frequency changes in the state of the economy, as captured by expected macroeconomic growth and volatility, and exposure to...

Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can always observe all relevant firm information. But all...

We distill evidence about the effects of COVID-19 on companies. Stock price reactions to the shock differed greatly across firms, depending on their resilience to social distancing, financial flexibility, and corporate culture. The same characteristics affected the response of firms' sales,...