Author: Manfred Frühwirth
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
Book Description
This article presents joint econometric analysis of interest rate risk, issuer-specific risk (credit risk) and bond-specific risk (liquidity risk) in a Lando (1998) type model within the Duffie/Singleton framework. Our model accomodates correlation between interest rate risk and issuer-specific risk, but nevertheless admits sequential estimation of the risk-free term structure parameters and the issuer-specific and bond-specific components. By means of data augmentation and exact Bayesian analysis we develop a framework to estimate the model parameters and to separate the different components of risk. In particular we do not require an arbitrary benchmark bond that is free of any bond-specific risk. Our methodology infers a risk-free term structure process from liquid swap market data. Based on these estimates, issuer-specific and bond-specific risk are estimated from corporate bond data. The estimation procedure is applied to coupon bond data from the German corporate bond market.In addition, we look for the determinants of issuer and bond specific spreads. Regarding liquidity and credit risk, literature has suggested several proxies. Popular examples are issue size, time to maturity, age and number of active trading days (see e.g. Fisher (1959), Sarig/Warga (1989), Amihud/Mendelson (1991), Warga (1992), Crabbe/Turnber (1995), Kempf/Uhrig-Homburg (2000) or Houweling et al. (2003)) or the KMV distance to default and the debt to value ratio. Our methodology enables us to verify which of these proxies are the most appropriate.
The Risk Microstructure of Corporate Bonds
Author: Manfred Frühwirth
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
Book Description
This article presents joint econometric analysis of interest rate risk, issuer-specific risk (credit risk) and bond-specific risk (liquidity risk) in a Lando (1998) type model within the Duffie/Singleton framework. Our model accomodates correlation between interest rate risk and issuer-specific risk, but nevertheless admits sequential estimation of the risk-free term structure parameters and the issuer-specific and bond-specific components. By means of data augmentation and exact Bayesian analysis we develop a framework to estimate the model parameters and to separate the different components of risk. In particular we do not require an arbitrary benchmark bond that is free of any bond-specific risk. Our methodology infers a risk-free term structure process from liquid swap market data. Based on these estimates, issuer-specific and bond-specific risk are estimated from corporate bond data. The estimation procedure is applied to coupon bond data from the German corporate bond market.In addition, we look for the determinants of issuer and bond specific spreads. Regarding liquidity and credit risk, literature has suggested several proxies. Popular examples are issue size, time to maturity, age and number of active trading days (see e.g. Fisher (1959), Sarig/Warga (1989), Amihud/Mendelson (1991), Warga (1992), Crabbe/Turnber (1995), Kempf/Uhrig-Homburg (2000) or Houweling et al. (2003)) or the KMV distance to default and the debt to value ratio. Our methodology enables us to verify which of these proxies are the most appropriate.
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
Book Description
This article presents joint econometric analysis of interest rate risk, issuer-specific risk (credit risk) and bond-specific risk (liquidity risk) in a Lando (1998) type model within the Duffie/Singleton framework. Our model accomodates correlation between interest rate risk and issuer-specific risk, but nevertheless admits sequential estimation of the risk-free term structure parameters and the issuer-specific and bond-specific components. By means of data augmentation and exact Bayesian analysis we develop a framework to estimate the model parameters and to separate the different components of risk. In particular we do not require an arbitrary benchmark bond that is free of any bond-specific risk. Our methodology infers a risk-free term structure process from liquid swap market data. Based on these estimates, issuer-specific and bond-specific risk are estimated from corporate bond data. The estimation procedure is applied to coupon bond data from the German corporate bond market.In addition, we look for the determinants of issuer and bond specific spreads. Regarding liquidity and credit risk, literature has suggested several proxies. Popular examples are issue size, time to maturity, age and number of active trading days (see e.g. Fisher (1959), Sarig/Warga (1989), Amihud/Mendelson (1991), Warga (1992), Crabbe/Turnber (1995), Kempf/Uhrig-Homburg (2000) or Houweling et al. (2003)) or the KMV distance to default and the debt to value ratio. Our methodology enables us to verify which of these proxies are the most appropriate.
An Empirical Study of Corporate Bond Market Microstructure
Author: Gwangheon Hong
Publisher:
ISBN:
Category : Bond market
Languages : en
Pages : 252
Book Description
Publisher:
ISBN:
Category : Bond market
Languages : en
Pages : 252
Book Description
Three Essays on the Market Microstructure of U.S. Corporate Bond Markets
Author: Brian Mattmann
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Empirical Market Microstructure
Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
Liquidity Risk in the Corporate Bond Markets
Author: George Chacko
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
Book Description
A great deal of work has focused on market microstructure, but relatively little work has been devoted to the study of risk associated with liquidity. The work that has been done has almost exclusively focused on US equities - primarily because that market is fairly liquid and therefore data is plentiful. However, because that market is liquid, the empirical results been mixed. For our work, we use a unique database of US corporate bond transactions and holdings. Because the corporate bond market is several orders of magnitude more illiquid than the equity market, this seems a much more appropriate setting to study the effects of illiquidity. To get around the problem of a lack of trading (and therefore data), we construct a new measure of liquidity which does not require trading. Using this measure, we show that not only is liquidity risk priced, but that the effects of liquidity risk are quite pervasive and need to be controlled for carefully when doing virtually any analysis of security returns.
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
Book Description
A great deal of work has focused on market microstructure, but relatively little work has been devoted to the study of risk associated with liquidity. The work that has been done has almost exclusively focused on US equities - primarily because that market is fairly liquid and therefore data is plentiful. However, because that market is liquid, the empirical results been mixed. For our work, we use a unique database of US corporate bond transactions and holdings. Because the corporate bond market is several orders of magnitude more illiquid than the equity market, this seems a much more appropriate setting to study the effects of illiquidity. To get around the problem of a lack of trading (and therefore data), we construct a new measure of liquidity which does not require trading. Using this measure, we show that not only is liquidity risk priced, but that the effects of liquidity risk are quite pervasive and need to be controlled for carefully when doing virtually any analysis of security returns.
Bond Liquidity, Risk Taking and Corporate Innovation
Author: Huong Dang
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
Book Description
This paper investigates how market liquidity condition of corporate bonds can affect firm investment policy, specifically its risk taking. We hypothesize that bond liquidity can affect firm's risk taking via the disciplinary function of trading. Indeed, we document a positive relationship between bond illiquidity and firms' risk taking, specifically a one standard deviation in Amihud illiquidity measure is associated with nearly 20% increase in investment ratio. Using introduction of TRACE in 2002 as an exogenous shock to bond trading infrastructure, our findings suggest that the relationship is causal. Finally, we document that the shift in risk taking increase the volume but not necessarily the quality of innovation output. Our empirical results have important implications for firms risk policy and growth as well as for designing of market microstructure.
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
Book Description
This paper investigates how market liquidity condition of corporate bonds can affect firm investment policy, specifically its risk taking. We hypothesize that bond liquidity can affect firm's risk taking via the disciplinary function of trading. Indeed, we document a positive relationship between bond illiquidity and firms' risk taking, specifically a one standard deviation in Amihud illiquidity measure is associated with nearly 20% increase in investment ratio. Using introduction of TRACE in 2002 as an exogenous shock to bond trading infrastructure, our findings suggest that the relationship is causal. Finally, we document that the shift in risk taking increase the volume but not necessarily the quality of innovation output. Our empirical results have important implications for firms risk policy and growth as well as for designing of market microstructure.
Corporate Bonds
Author: Richard C. Wilson
Publisher: John Wiley & Sons
ISBN: 9781883249076
Category : Business & Economics
Languages : en
Pages : 414
Book Description
Corporate Bonds: Structures & Analysis covers every aspect of corporate bonds, including bond structures, credit analysis, and investment strategies. This book discusses state-of-the-art technology for valuing corporate bonds, as well as innovative new products such as step-up notes and range notes. Complete with contributions from today's top financial experts, Corporate Bonds is the definitive reference for this vital market.
Publisher: John Wiley & Sons
ISBN: 9781883249076
Category : Business & Economics
Languages : en
Pages : 414
Book Description
Corporate Bonds: Structures & Analysis covers every aspect of corporate bonds, including bond structures, credit analysis, and investment strategies. This book discusses state-of-the-art technology for valuing corporate bonds, as well as innovative new products such as step-up notes and range notes. Complete with contributions from today's top financial experts, Corporate Bonds is the definitive reference for this vital market.
Informed Trading and Its Implications for Corporate Bond Pricing
Author: Xing Zhou
Publisher:
ISBN:
Category :
Languages : en
Pages : 246
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 246
Book Description
Investing in Corporate Bonds and Credit Risk
Author: F. Hagenstein
Publisher: Springer
ISBN: 0230523293
Category : Business & Economics
Languages : en
Pages : 355
Book Description
Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
Publisher: Springer
ISBN: 0230523293
Category : Business & Economics
Languages : en
Pages : 355
Book Description
Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
The Microstructure of Government Securities Markets
Author: Mr.Peter Dattels
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 106
Book Description
This paper applies the “market microstructure” literature to the specific features of government securities markets and draws implications for the strategy to develop government securities markets. It argues for an active role of the authorities in fostering the development of efficient market structures.
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 106
Book Description
This paper applies the “market microstructure” literature to the specific features of government securities markets and draws implications for the strategy to develop government securities markets. It argues for an active role of the authorities in fostering the development of efficient market structures.