This paper performs a cross-country panel data analysis to determine whether gold holdings of central banks contribute sovereign creditworthiness. Higher bank are found reduce credit default swap (CDS) spreads, measure country risk. effect is stronger during global and country-specific crisis episodes. We account for endogeneity reserves using an instrumental variables approach. Potential econo...

In our project we have used parametric simulation and filtered historical simulation by GARCH processes to model the future position on a portfolio of some actively trading S&P bonds and related credit default swaps. The portfolio is marked to market daily based on the daily prices and CDS spreads over a seven year period. The Credit default swaps are priced daily based on the shifts in the def...

Abstract—In this paper the CVA computation of interest rate swap is presented based on its rating. Rating and probability default given by Moody’s Investors Service are used to calculate our CVA for a specific swap with different maturities. With this computation the influence of rating variation can be shown on CVA. Application is made to the analysis of Greek CDS variation during the period o...

This paper explores the parity between CDS premiums and bond spreads for emerging market sovereign entities. Previous studies found that this parity holds between bonds and CDSs for US corporate debt. We …nd that this parity does not hold for Emerging Markets sovereign debt. In order to explain the pricing deviations we focus on two frictions, liquidity and counterparty risk. First, we present ...

This paper investigates the impact of infectious diseases on evolution sovereign credit default swap (CDS) spreads for a panel 77 countries. Using annual data over 2004–2020, we find that infectious-disease outbreaks have no discernible effect CDS spreads, after controlling macroeconomic and institutional factors. However, granular analysis using high-frequency indicates COVID-19 pandemic has h...

After making a loan, a bank finds out if the loan needs contract enforcement (“monitoring”); it also decides whether to lay off credit risk in order to release costly capital. A bank can lay off credit risk by either selling the loan or by buying insurance through a credit default swap (CDS). With a CDS, the originating bank retains the loan’s control rights but no longer has an incentive to mo...

This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with exponential default barriers, analytical formulae are obtained for both credit default swap spreads and corporate bond yields. The credit dependence structure is i...

Starting from the analysis of a levered firm’s capital structure, I show that corporate default risk becomes measurable through leverage effect, i.e., negative correlation observed between stock returns and changes in volatility. In this model, debt-to-asset ratio governs elasticity probabilities relative to equity prices. use large dataset S&P 500 firms an extended timeframe (2008–2019) examin...